GJMT II Issue PDF

GJMT Journal
Global Journal of Management & Technology
Volume 2 ▪ Issue 1 ▪ April 2013
Association of Scholars and Professionals

Hyderabad-8
Editor:
Dr. T. Satyanarayana Chary
Board of Editors:
G.P. Samantha, Director & Member of Faculty, Reserve Bank Staff College, Chennai.
Dr. S. J. Manjuanth, Associate Professor, University of Mysore.
Mohd. Abu Bakr, Performance Engineer, R & D, Microsoft - India, Hyderabad.
Syed Omar Farooq Ahmed, Associate Project, CTS - India, Hyderabad.
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Contents
Role of Venture Capital in Promotion of Biotechnology - Indian Experience
Dr. T. Satyanarayana Chary………………………..…………………………………………………………….… 1
Employee Psychology Vis-a -Vis Flexible Work Arrangements in IT Sector

Mrs.D.Sucharitha, Abhishikth Sandeep.A, Dr.J.U.Maheswar Reddy ………………………………………….13
Performance of Indian Manufacturing Sector

R. Naveen Kumar……………………………………………………………………………………………………...18
Private Equity in India - An Overview

P. Jaipal ...………………………………………………..…………………………………………………………... 24
Inclusive Growth in India - A Mirror Image

Dr. D. Madhan Mohan, P. Sagar …………………………………………………………………………………. 28
Efficacy through Working Capital Management - (A Study of Venky’s India Limited)

Mohd Mujahed Ali ……………………………….…………………………………………………………………. 32
Aim & Scope
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management practices and computer science applications. Manuscripts that are suitable for publication in the
Global Journal of Management & Technology cover domains such as business strategy and policy, entrepre-
neurship, human resource management, organizational behavior, organizational theory, research methods, data
mining, operation research, wireless networks and image pattern recognition.
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ISSN: 2319-6823|Volume 2, Issue 1, April 2013
Role of Venture Capital in Promotion of

Biotechnology - Indian Experience
1
Dr. T. Satyanarayana Chary
Abstract: We are in the era of indispensable liberalization, inevitable privatization and invincible globaliza-
tion, where change is playing a dominant and pervasive role. It is due to such environment, coping with
change through new and innovative technologies have become the order of the day. In this regard, after lead-
ing the IT bandwagon, India has shifted its focus to Biotechnology. Venture capital funds in recent past start-
ed creeping in biotech domain as it is found as highly potential and productive area for their investment in
Indian as well as abroad. In order to examine the role of venture capital in promotion of biotechnology the
paper is moulded for 5 fold objective, they are:
1. To discuss the concept of Biotechnology with a comparison to information technology.

2. To study the impact of Biotechnology on Economy.
3. To analyze the state of Biotechnology Industry at global level in general and India in particular.
4. To find out that how biotech companies are managing the finance required for developing their new
ideas.
5. To review the investment scenario of biotech industry in India.
I. INTRODUCTION
Biotechnology could be defined as the application of organisms, biological processes to manufacturing
and service industries (Coombs, 1986). Alternatively, biotechnology could be considered as commercial ex-
ploitation of living organisms or their components (Primrose, 1987). Yet another definition is provided by the
Office of Technology Assessment of the USA, which defines biotechnology as any technique that uses living
organisms, or substances from those organisms, to make or modify a product to improve plants or animals or
to develop micro-organisms for specific uses (OTA, 1989).
Karl Ereky, a Hungarian engineer, first coined the word biotechnology in 1919. At the time, the term re-
ferred to all lines of work involved in creating products from raw materials with the aid of living organisms.
Today, the Biotechnology Industry Organization (BIO) defines biotechnology as "the use of cellular and mo-
lecular processes to solve problems or make products."
Biotechnology is a technology based on the use of tools such as in vitro tissue and cell culture techniques,
molecular methods and recombinant DNA technology that are used to modify the genetic make-up and gener-
ate new products, which give researchers a new capability of modifying crop plants to produce natural compo-
nents more effectively and even to produce unexpected materials. In the given complexity of socio-economic,
political and ecological problems behind deficits in food security, Agricultural Biotechnology (Agricultural
biotechnology is one of the most rapidly growing technologies in the history of agriculture ever known to man-
kind) can be panacea for all countries. If used wisely in conjunction with conventional breeding, improved
agricultural methods and better agricultural policies, it can become a powerful tool in the fight for higher
productivity in the small and poor farmer’s field.
The current trends in the sector show tremendous growth opportunities and it is being considered as a sun-
rise industry and is ranked at par with IT by experts. This is a field, which can revolutionize the growth
1
Professor, Dept of Business Management, Telangana University, Nizambad, A.P.
E-mail: tsnchary@gmail.com
1
▪ Role of Venture Capital in Promotion of
prospects of a developing country. In the context of developing countries, agricultural has immense value.
There are multiple uses of biotechnology techniques, and they have he potential of significantly influencing the
economy of a country. They are expected to result in increased agricultural production; improved comparative
advantage in production of some commodities new opportunities for the use of marginal lands and a reduced
need for agrochemicals (World Bank, 1990). Biotechnological techniques can help to improve the tolerance of
both crops and animals to specific stresses, pests, and pathogens and to increase the efficiency with which
plants and livestock utilize limiting nutrients.
Biotechnology has become the growing sector in international economy as we make transition form one
millennium to another. It involves application of biological organisms, systems or processes to the manufactur-
ing and service industries. Biotechnology is often referred to as an ‘enabling’ technology, that is, a technology
which triggers wider applications in a number of industries, including:
1. Health - Pharmaceuticals diagnostics, gene therapy, biomedical products, medical devices and equip-
ment.
2. Agriculture - Plant and animal breeding, veterinary products and diagnostics.
3. Environment and resources - Pollution control, land bio-remediation, water treatment, minerals ex-
traction and processing, wastewater treatment, salinity control and pest management.
4. Food and beverage processing - Starters, enzymes, fermentation, food ingredients fractionation.
5. Industrial applications - agriculture product processing (oils, fiber, etc.), bioprocess, and industrial
enzymes.
6. Energy production - biomass.
II. INFORMATION TECHNOLOGY VERSUS BIOTECHNOLOGY

The biology industry is similar to information technology industry populated by a large number of entre-
preneurial high technology firms. On the other hand, comparison between success of Information Technology
and Biotechnology expose complications in management of biotechnology. A Comparison of Biotech to Infor-
mation technology based on various attributes is clearly analyzed in Table-I.
Table-I: Infor mation Technology Ver sus Biotechnology

Attributes Information Technology Biotechnology
Capital Investment Low High
Product Development Time Less than 1 year 3-10 years
Product Development Cost Low High
Regulatory Control Few Many
Failure Risk Low High
Entry Barriers Low High
IPR costs and values Low High
Market size Medium to Large Small to Medium
VC understands Good Poor
Market Size of Service >$ 100 billion (software) <$ 10 billion (CROs)
Cross-licensing High Medium to high
Public acceptance High Low (sensitivities)
2 GJMT, Vol 2, Issue 1, April 2013

Biotechnology - Indian Experience ▪
III. BIOTECHNOLOGY VALUE CHAIN

Value is the difference between what customers are willing to pay and the cost of producing the value
(Porter, 1990), the value chain in biotechnology is considered to be set of activities that are interconnected in
an organization and together deliver value to customer, in the form of a product or service. The organizational
value chain is the part of a larger stream of activities carried out by other entities, such as suppliers, distribu-
tors and customers. A detail study by John and Hine (2004) identified 8 definable elements that constitute the
biotechnology value change; basic research, applied research, development, verification and validation, proto-
type development, clinical/field trials, production/manufacturing and marketing. These major elements of the
value chain have sub-activity or sub-task to cater for unique differences between biotechnology products/
companies. The value chain analysis of biotechnology is shown in the following diagram .
Value Chain of the Biotechnology
Basic Verification Prototype Clinical Mar-

Applied Devel- Manu-
Research & Develop- Develop-
Research opment facturing keting
Trials Validation ment ment
DISCOVERY DEVELOPMENT COMMERCIALISATION

Idea generation Application Optimization Quality control Phase I Production Price
Idea evaluation Proof of principle Testing Pre-clinical testing Phase II Scale-Up Promotion
Feasibility IP generation Regulatory Phase II Standardization Distribution
Concepts Registration Validation Sales & service
Source: Jone and Hine (2004).
The above value chain is basically applicable to manufacturing of health care products, industrial biotech-
nology and food and beverage processing. In Agriculture, predominant biotechnology application is production
of genetically engineered seeds or genetically modified (GM) seeds. Steps in R&D to seed marketing would
take 8-10 years along the value chain after clearances from regulatory prospective and several millions of dol-
lars. However, based on the above analysis it can be identifiable that managerial skills and decisions in terms
of planning and execution of biotechnology projects are involved at a number of stages of the value chain to-
wards commercialization of biotechnology. Hence, the five key stages of management that involves in the bio-
technology projects are:
1. Research and Development.
2. Regulation.
3. Intellectual property.
4. Financial management.
5. Managing transition.
IV. IMPACT OF BIOTECHNOLOGY ON ECONOMY

It is as off-putting a task today to divine how biotechnology will affect future economic activity as it
might have been for economists in the 18th, 19th and 20th centuries to forecast how the steam engine, electric-
ity and the microchip would influence and eventually transform the world economy. With the assistance of
mind-boggling inventions, humankind's bucolic existence has morphed into a world that our agrarian ancestors
would scarcely recognize. Biotechnology may change our world as much. Even though the bioscience indus-
try has been around for 25 years and the gargantuan task of mapping the human genome is complete, it's still
not clear to what extent life science technology will affect our economy. Some observers have already labeled
GJMT, Vol 2, Issue 1, April 2013 3

this the "Biological Century," betting that advances in the life sciences will yield changes more momentous
than those of electricity and computers. Such predictions may be over inflated, but biotechnology has the po-
tential to greatly affect the economy.
Two types of economic effects are already appearing in the nascent industry. By analogy, they resemble
the direct splash of a stone tossed into a still pond and the indirect rippling that follows. Direct impacts from
biotechnology include such obvious pluses as research and development (R&D) spending, sophisticated jobs
and tax revenues. Biotech companies have already sprouted up in many parts of the country. Less visible are
the indirect effects, which include improvements in quality of life and living standards stemming from faster
labor productivity growth, better health products and services, and a cleaner environment.
In May 2000, BIO commissioned Ernst & Young to determine the aggregate impact firms involved in
biotechnology have on the U.S. economy. The study looked at information from firms whose primary business
operations fell under five Standard Industrial Classification codes. While some components of biotech activity
are not included in this definition, the report gives an idea of the direct impact bioscience is having on the
economy. The study reveals impressive growth for the industry. The life science industry more than doubled
revenue from $8 billion in 1993 to $20.2 billion in 1999. R&D spending was $11 billion in 1999, not counting
monies spent by colleges, universities and nonprofits. Total tax collections reached nearly $10 billion. Federal
taxes accounted for $6.8 billion of the total and state and local taxes for the remainder.
Completion of the human genome and promises of new medicines sent biotech share prices skyward in
1999 and 2000. Since then, sparse profits and the realization that investment returns to biotechnology are going
to take some time has kept overall stock prices subdued. Profitability in the four largest biotech firms has in-
stilled recent confidence in the sector, but the majority of firms have yet to show a profit. Overall health care
and prescription drug expenditures have increased steadily in recent years. For example, health care expendi-
tures as a percentage of GDP have grown from 8.8 percent in 1980 to 13 percent in 2000. Prescription drug
expenditures have been climbing steadily since 1994. Recognizing the growth potential in the industry, 41
states, including Texas, New Mexico and Louisiana, are currently pursuing economic initiatives to foster
growth in their emerging biotechnology sectors.
Still a relative newcomer to the economy, biotechnology is already having a positive indirect influence
on economic activity. Ernst & Young estimates that biotechnology has an employment multiplier of 2.9. In
other words, each job created in biotech generates an additional 2.9 jobs, resulting from biotech firms' purchas-
es and consumer spending of biotech employees. With the multiplier effect, biotech's total impact on employ-
ment comes in at more than 4, 37,000 jobs.
Ernst & Young gives biotech a 2.3 revenue multiplier, increasing the total impact on revenues from bio-
technology to $46.5 billion. The personal income multiplier is estimated to be 2, which results in a $28.8 bil-
lion total impact on personal income from the industry. Biotechnology's contributions to medicine and health
care are growing rapidly, promising to increase human longevity and healthiness. To the extent that biotech-
nology results in new treatments for old ailments, people will become more productive over their lifetimes.
In addition, improved strains in agricultural crops have helped increase yields for many years. Research
and development of more-productive and disease-resistant crops have enabled output per farmer to increase
steadily. Improvements in quality of life will continue as scientists’ further harness biological processes to
clean up hazardous waste and contaminated areas. Environmental remediation is growing fast as a result of
increased public demand for a cleaner, safer and more natural living space. However the impact of biotechnol-
ogy on economy, society and the environment is very high will be also in coming future.

V. GLOBAL BIOTECH INDUSTRY - AN OVERVIEW

Thus Biotechnology industry is playing a dominant role in the present techno-economic era, in fact it is
the industry outpacing Software industry over the world. So the industry has been attracting significant amount
of funds of all venture capital in the world, particularly in developed countries. However this field is dominat-
ed by the private industry in developed countries with the MNC’s playing a leading role.
Undoubtedly, the entire globe is at the dawn of another revolution fuelled by biotechnology. The develop-
ment in gene technology promise new genetically based advances leading to higher yields and better food
quality. Already the biotechnology revolution is of significance in global agriculture. There are transgenic
crops of cotton, maize, soyabean and canola, planted in more than 82 million hectares worldwide. Under pre-
vailing condition, it is desirable to use the technology foresight (TF) that is a prospective and transparent
framework, to analyse the future use of the rapidly progressing scientific field of GM crops. TF is the process
and dialogue involved in systematically attempting to look into the long-term future of science, technology,
economy and society, with the aim of identifying areas of strategic research. Public acceptance for agricultural
biotechnology is at a critical juncture. Given complexity of socioeconomic, political, and ecological problems
behind deficits in food security, agricultural biotechnology can be one of the potential technologies for all the
countries. It is used wisely in conjunction with conventional breeding, improved agricultural methods and bet-
ter agricultural policies, it can become a powerful tool in the struggle for higher productivity in the small fram-
ers field.
In 2003 global biotech industry includes more than 4300 companies (613 of these are publicly traded)
throughout the USA, Canada, Europe, Australia/New Zealand, and Asia applying revolutionary discoveries in
science to tackle the planet’s toughest health care, agricultural, industrial and environmental challenges (Ernst
and Young, 2003). By 2005 European biotech market could double from current valuations to more than $100
billion. Biotechnology is an emerging sector in Asia/Pacific experiencing notable expansion in India, Austral-
ia, China and Singapore. Global market for biotechnology applications will reach US$50 billion annually by
2005 – strongest growth is projected for agri-food sector. Global value for genetically modified crops grew
from US$75 million in 1995 to US$1.64 billion in 1998 and projected at 46 billion by 2005 and to 20 billion
by 2010 (Clive James 2003).
Many studies proved that the biotechnology has greater promise in developing countries like South Asian
countries because of their high reliance on agriculture (for income and employment of the large population)
coupled with low crop yield, which is detrimental for these countries as latter erode the level playing field for
these countries in agricultural trade under liberalized trade policy. In this regard some of the developing coun-
tries such as Mexico, Argentina, China and Chile have already made considerable economic advances by inte-
grating biotechnology into their agricultural programmes. Others such as Cuba, Egypt and South Africa are
also following close behind and clearly see towards biotechnology as a means of advancing their economies.
India is also striving hard to solve so many vexing problems with which it is combating through biotechnology
such as providing nutritional security to its ever-burgeoning population, large chunk of who are already mal-
nourished, population presser on land because of intensive land use and widespread biomass shortage, cultivat-
ed soils are being depleted of essential nutrients and organic matter, increasing strain of Fisheries, livestock
and forestry etc.
Some of the achievements in biotechnology include tissue culture regeneration, stress biology, and maker-
assisted breeding, as well as new types of bit fertilizer and bio pesticide formulations. Research to develop
genetically improved (transgenic) plants for brassicas, mung bean, cotton and potato is well advanced. Pro-
grams adapted to local needs and priorities are under way in countries like Philippines, Thailand, Brazil, Costa
Rica, Mexico, Egypt, Iran, Jordan, Kenya, South Africa, and Zimbabwe. Of particular interest for Africa, the
research results are thriving well on the transgenic sweet potato resistant to feathery mottle virus in Kenya and

on South African transgenic sweet potatoes that contain up to five times the normal protein levels.
In many countries, tissue culture has produced and provided planting material to the farmers that increased
crops’ yields manifold. In addition, market assisted selection and DNA fingerprinting allows a faster and more
targeted development of improved genotypes for important agricultural species. Moreover, these technologies
make available new research methods, which can assist in the conservation and characterization of biodiversi-
ty. These new techniques will enable scientists to recognize and target quantitative trait loci and thus increase
the efficiency of breeding for some traditionally intractable agronomic problems such as drought resistance
and improved root systems.
VI. MANAGING FINANCES

Compared to IT industry, the BT industry is characterized by intensive research efforts, long gestation
period, and stringent regulation. All companies/projects small, medium or big would require adequate invest-
ment for their ventures. The financial management aspects are in no way broadly different from many tradi-
tional industries. However, start-up companies with scientists technocrats together with small investors, as
promoters require a venture risk capital. Many government agencies and financial constitutions have instituted
venture capital funds. Management of venture capital funds and preparation of detailed project document for
seeking such funds requires a close collaboration among experts specializing in specific biotechnologies, fi-
nance, marketing and technology forecasting.
On the other hand, the biotechnologies involve high costs and do not address the immediate needs of the
individual resource poor farmers. But they help a lot after some time with greater level of benefits or profits if
they are properly developed. Development of biotechnologies need huge amount of investment as they are
highly risk oriented and take significant time to come out as an out put from the research in laboratory. Not
only that even the technology that is in the process may or may not succeed afterwards, so the traditional in-
vestors like bankers, financial institutions may not come forward to promote the projects on biotechnologies
development as they look for higher returns at lower degree of risk. A question arises here that who can fi-
nance such type of projects when they are not ready to put their money? The solution for these new, innovative
and technological projects is venture capital.
Venture capital is the capital available for financing new business venture. It is also often thought of as the
early stage financing of new and young enterprises seeking to grow rapidly. In a broad sense the venture capi-
tal refers to capital investment made in a business or industrial enterprise that carries high elements of risk,
insecurity and probability of business hazards. Capital investment may assume the form of either equity or
debt or both i.e. Derivative investments. The risk associates with the enterprise could be so high as to entail
total loss or be so insignificant as to lead to high gains. However, venture capital finance is different from
conventional finance i.e. money lending and bank finance, because venture capital financier takes keen interest
in business performance of the investees’ firm. Thus venture capital is the engine that can finance the growth
of knowledge based industries worldwide and has become very popular in different parts of country, as it is
instrumental for industrial development by exploiting vast and untapped potentialities.
Developed countries have invested substantial amounts in biotechnological research, and expect to reap
the benefits by the end of this century. Both, the government and private sectors have provided support in
this regard. In developing countries, there is little research going on in the area biotechnology since they lack
both the capital and the skills. The field of biotechnology is fraught with high risk of failure. Because of the
considerable investment and high risk, international research and funding agencies will have to support the
research efforts of developing countries.
Although biotechnology research is quite expensive and the risk of failure of specific projects quite high,
if the projects succeed, they can result in substantial gains. Because of high risk, the normal channels of fi-

nancing are not available to finance biotechnology projects, and risk financing in the form of venture capital
would thus be needed to support biotechnological research and projects.
VII. BIOTECHNOLOGY IN INDIA

Recognizing the importance of biotechnology, in India in 1981, the government established a National
Biotechnology Board (NBTB). In 1986, the NBTB was replaced by the Department of Biotechnology (DBT)
and was given the primary responsibility for the promotion of the biotechnology at all levels (Ghose 1990). In
1990, the need to have an institutional mechanism to ensure close interaction between research and develop-
ment, pilot plant studies, market survey, certification and technology developments has led to the creation of
the Biotech Consortium India Limited (BCIL, 1990).
Under the auspices of the Scientific Advisory Committee of the DBT, thirteen Task Forces were constitut-
ed which covered practically all the important disciplines of biotechnology, including manpower development
(Ramachandran, 1991). More than 200 researchers, drawn from university departments, national laboratories,
industries and governmental organizations, are involved in identifying new areas as well as upgrading modify-
ing the ongoing programmes. The essential components of biotechnological projects are manpower expertise
and appropriate resources. At present in India, there are not many organizations, which can independently take
up a project from inception to the market as there is close association between a variety of laboratories is not
taking place. In contrast assessing the technical feasibility requires an understanding of the state-of-art and the
ability to use the appropriate technology.
With the creation of BCIL and the new liberalized policies of the government of India, several companies
have set up modern facilities for large-scale production of antibiotics like penicillin, tetracycline, and strepto-
mycin etc. A plant was put into operation for the production of HFS near Madras. A few companies have
launched their products, based on tissue culture. One such big plant was set up in Cochin. Several pharmaceu-
tical firms are marketing immuno-diagnostic kits o for the early detection of pregnancy and diseases like am-
oebiasis, hepatitis and typhoid. Recently, an indigenously developed kit for early detection of pregnancy was
launched. Many other diagnostics kits are likely to touch the market soon. The government of India has ap-
proved a number of new industrial licenses/foreign collaborations in the area of agriculture, environmental and
food biotechnology, and yet many more are under active consideration. (See Table-II for the details of Biotech
Industry and Exhibit III for Budgetary Allocations of Major Funding Agencies in India).
Table -II: Biotech Industr y in 2004-05
Revenues (in Rs.Crore) Market Share (%)

Segment Growth (%)
2003-04 2004-05 2003-04 2004-05
BioPharma 2752 3570 79.19 75.24 29.72
BioServices 275 425 7.91 8.96 54.55
BioAgri 130 330 3.74 6.95 153.85
Bioindustrial 238 320 6.85 6.74 34.45
Bioinformatics 80 100 2.30 2.11 25.00
Total Industry Size 3475 4745 100.00 100.00 36.55

Source: Biospectrum, June 2005.

VIII. INVESTMENTS IN INDIAN BIOTECHNOLOGY

Investments in Indian biotechnology have begun with the early initiatives of government and setting up of
separate department of biotechnology. Five-year plans are made for such investment by the department for
promoting biotechnology R&D, human resource development, establishment of biotech facilities, product and
processes development and other activities. Since the establishment of the department during the financial year
1985-1986 till March 2002, an investment of Rs.12.95 billion has been made. The 50% of this investment has
been made in the last five years and the same is increasing approximately by 30%. In the early years most of
this investment was made for human resource development and establishment of infrastructure. Since, 1997-
98 the annual allocations for R&D are almost more than 60%. Medical and agriculture research has received
maximum funds. Besides DBT, other Government S&T agencies such as Indian Council for Agricultural Re-
search (ICAR), Council of Scientific and Industrial Research (CSIR), Indian Council of Medical Research
(ICMR), University Grants Commission (UGC) and Department of Science & Technology (DST) also support
R&D programs in biotechnology. Since in all of the organizations there is no separate data pertaining to bio-
technology. It is difficult to provide the actual investments by these agencies. However normally the contribu-
tion or sharing of cost in most of the projects is about 30% and therefore, it can be presumed that the contribu-
tion by all these Organizations would be around Rs.4 billion since 1985 till date.
On the other hand private sector investment has also been picking up since 1997 and particularly visible
after the announcement of draft human genome sequence in the year 2000. There are no authentic statistics on
the investment in the private sectors. However Biotech Consortium India Ltd (BCIL) in January 2001 includes
biotech activities of about 176 companies in private sectors whose products range from those in agriculture,
environment and healthcare. Similarly it is also estimated that the industry employees 10,000 to 20,000 people
and generates about US $ 500 million revenue annually. This figure is estimated @US $2 billion by the end of
2001. The Indian share of biotech market was estimated at US $ 2.5 billion this year. Consumption of biotech
products in expected to reach Rs.14.6 billion.
However, according to Indian directory prepared by Biotechnology Consortium India Ltd (BCIL) in Janu-
ary 2001 includes biotechnology activities of about 176 companies in private sector whose products range
from those in agriculture, environment and healthcare. On the other hand, estimates have also been made that
about 800 companies are operating in various sectors of biotechnology, based on the definition that biotechnol-
ogy includes basic industry such as food processing and highly sophisticated recombinant products. Employ-
ing the same definition on estimate says that 10 percent of these companies are operating in modern biotech-
nology sectors while according to other conservative estimates there are only 20 companies engaged in sophis-
ticated biotechnology business. Similarly, it is also estimated that the industry employs 10,000 to
20,000people and generates roughly revenue of US$ 500million annually. The Indian share of the biotechnolo-
gy market was estimated at US$ 2.5 billion this year. Consumption of biotechnology products is expected to
touch the figure of Rs.14.6 billion. Notwithstanding these figures by various estimations, it can be concluded
that India’s burgeoning biotechnology sector is an oasis of rich picking for investors as the government leads
the drive to develop the industry. Building a biotechnology industry is a part of knowledge economy strategy
of the government. A growing number of high quality Indian biotechnology investment opportunities exist for
both early and late stage investors. Some of the major investor include Connect Capital, ING Barings, Dres-
dner Kleinwort Benson, London and Warburg Pincus are evaluating Indian Biotechnology investment opportu-
nities.
With the increased role of established private sector as well as start up companies investing in biotechnol-
ogy, several financial institutions/ agencies both in public and private sector have launched venture capital
funding mechanism. The Ministry of Science & Technology has provided these opportunities through the es-
tablishment of Technology Development Board (TDB) in 1992 for providing financial assistance to industrial
concerns and other agencies attempting development and commercialization of indigenous technology or

adopting imported technology for wider domestic application. The board has been helpful particularly in pro-
moting several new start up companies. Since its formation the board ha signed 100 agreements with commer-
cial enterprises/agencies with a total projects cost of Rs.15 billion and commitments of Rs.3.58 billion finan-
cial assistance to areas of health and medicine engineering and electronics, chemicals and lubricants, agricul-
ture and biotechnology, waste utilization etc. Companies such as M/s Shanta Biotech and M/s Bharat Biotech
producing recombinant hepatitis vaccine, M/s ABL biotech in marine biotechnology are some known and suc-
cessful beneficiaries (Exhibit III)
Venture Capital Funding (VCF) in India for biotechnology projects picked up with success stories of TDB
in the hands of the prominent VC firms, including Industrial Credit and Investment Corporation of India
(ICICI), Morgan Stanley and Small Industrial Development Bank of India (SIDBI) are active. Hence the ven-
ture capital is mostly available to companies whose product and market are clearly identified and research
leads are already available for commercialization. So, eventually it can be said that venture capital is only the
way of promoting and developing the biotechnologies for the betterment of the society. In another way one can
also say that biotechnology is the cutting edge for venture capital in the present context. But before putting
their hand, venture capitalists should understand well the Strength and Weakness as well as the benefits that
they get from government in terms of incentives. Not only that, the venture capital funds needs good human
resource having expertise knowledge and specializing in specific biotechnologies, finance, marketing and tech-
nology forecasting.
In recent times, liberalization has unleashed competition for garnering capital in the Indian market. This is
more so for technology companies. Some of the major firms in IT and pharmaceutical sector have already
achieved a listing at NASDAQ. The venture capital (VC) industry in India is also emerging as a vibrant sector
to support information technology, biotechnology, telecommunication and food processing related industries.
The venture capital industry in India has emerged after the Government of India, in 1988, announced guide-
lines for setting up venture capital funds (VCFs). These guidelines restricted the setting up of VCFs by banks
or financial institutions only. Later, in September 1995, Government of India, issued guidelines for overseas
venture capital investment in India whereas the Central Board of Direct Taxes (CBDT) issued guidelines for
tax exemption purposes 33. As a part of its mandate to regulate and to develop the Indian capital markets, Se-
curities and Exchange Board of India (SEBI) framed the SEBI (Venture Capital Funds) Regulations, 1996.
While only 8 domestic VCFs were registered with SEBI during 1996-98, more than 30 additional funds have
already been registered for 2000-01. In the last Budget Proposals 2000-01, the Finance Minister announced
SEBI as the single point nodal agency for registration and regulation of both domestic and overseas venture
capital funds. Now, there are almost 70 VCFs with a focus on India34. Their cumulative assets under manage-
ment would be somewhere close to $5billion. The figures from the Indian Venture Capital Association (IVCA)
reveal that, till 2000, around Rs. 22,000 million (US$ 500 million) had been committed by the domestic VCFs
and offshore funds which are members of IVCA. The figures available from private sources indicate that over-
all funds committed are around US$ 1.3 billion35. It is being hoped that by 2005, India would have $10 billion
invested through VCFs. As Table 6 shows, India witnessed the second highest disbursement of venture capital
in the Asia-Pacific region during 2001 at $ 1.1 billion across 91 companies.36 Japan received the highest dis-
bursement in the region with $1.8 billion being invested in 39 companies. In contrast, China received only
$393 million during the year across 11 companies, which placed it in sixth place among the 13 major markets,
which constitute the region. While the total disbursement of $1.1 billion in 2001 was marginally lower than the
previous year’s (2000) $11.3 billion. The situation is expected to change during the current calendar year
(2002), with total disbursement projected to be in the region of $2 billion, according to the annual strategic
review of the Indian IT industry by the National Association of Software and Services Companies (Nasscom).
The pattern of VC disbursements last year indicates a preference for late-stage funding. According to the find-
ings of the review, seed funding accounted for only 15 per cent of the total disbursement, while late-stage
funding constituted 41 per cent. Deal sizes have also undergone a change. First round funding saw deal sizes in
the range of $1-1.5 million, second round deal sizes were in the region of $3-5 million, third round deals

ranged between $4-8 million and deals in the fourth round were in the region of $5-15 million37. The 70 VCs
operating in India have $5.6 billion in assets under management. There has also been a significant shift to non-
internet investments, with the share of non-internet investments increasing to 68 per cent in 2001 against 28
per cent in 2000. VCs have moved to longer gestation investments such as health, biotechnology, ITenabled
services and wireless applications. The consolidated VC pool in the Asia-Pacific region is estimated at $81.2
billion.
The biotechnology commitments by different VCFs amount to almost Rs. 3000 million (Figure 4). Out of
this, Indian Credit and Investment Corporation of India (ICICI) and Small Industries Development Bank of
India (SIDBI) have almost similar commitments for biotechnology while new entrants like Kera la Venture
Capital Fund (KVCF) has committed Rs. 200 million, which is just 4 per cent of the total venture capital. SID-
BI and ICICI have devoted Rs. 1000 million and Rs. 1700 million respectively. The two other southern states
pro-actively supporting biotechnology through venture capital are Andhra Pradesh and Karnataka. Andhra
Pradesh Industrial Development Corporation (APIDC) has devoted Rs. 500 million, which is 18 per cent of the
total amount available at the national level while Karnataka State Industrial Infrastructure Development Cor-
poration (KSIIDC) share 7 per cent with an allocation of Rs100 million. However every country has been
striving hard to promote biotechnology a lot for the purpose of developing the new and innovative technolo-
gies to attain the greater heights in agriculture, health and other sectors. So it is very clear that the role of ven-
ture capital is very significant in promoting the biotechnology that is an engine for the growth of the econo-
mies. Therefore all the countries have realized that the only source for development and promotion of biotech-
nology is venture capital and motivating their financial institutions and commercial banks to do so.
Table-III: Ventur e Capital Disbur sements (Aver age of year s 2001-2010) ($ Million)
No. of Recipient
Country Investment
Companies
Japan 1,858 39
India 1,105 91
South Korea 1,054 19
Singapore 965 26
Australia 548 81
China 393 11
Hong Kong 263 23
Source: Nasscom (2001).
IX. INDIAN VC FINANCIAL SUPPORT FOR BIOTECHNOLOGY - PROBLEMS AND PROSPECTS

A joint survey report of the Confederation of Indian Industry (CII) and Rabo India on financing biotech
enterprises has said that biopharmaceuticals, bioinformatics and biotech services would be investors’ main
thrust area of investment. About 60-80 percent of funds indicated their preferences for this cluster. The next
preference of the funds is agricultural biotechnology and genomics with 20-40 percent. About 10-20 percent of
the investors have preference for medical devices and contract research. However, the report says, marine
biotechnology and environmental biotechnology are not on the investment radar of the funds, as less than 10
percent of the investors have preference for these areas.
The report has also pointed out that the abundance of talented, qualified and cost -competitive human re-
sources are the key features of the Indian biotechnology. Besides, internationally reputed information technol-

ogy capabilities that can be applied in bioinformatics and availability of vast gene pool and large patient base,
which can be used for drug development are boosting biotech sector in India, the report added. CII- Rabo India
reports noted some growth restricting factors that are hindering the progress and growth and investments op-
portunities in India. The factors include absence of adequate investments/risk capital, lack of quality entrepre-
neurs with sound business plans and commercial vision, lack of world class infrastructure facilities, inadequate
government support and absence of apt regulatory/policy framework and inability of potential investors to as-
sess intellectual property driven biotechnology business models.
X. CONCLUSION
India spends about 1 percent of the GDP on science and technology research. As in other areas of tech-
nology, biotechnology research is mostly funded by public money. India possesses adequate human resources
to carry out biotechnology research, but it lacks well-defined policy and programme. There are very few pri-
vate sector companies and public sector activities dedicated to biotechnology and the cooperation between
educational institutes, research and development organizations, and industry is low. Not only that, there is
barely inadequate venture capital finance is available in India for biotechnology and the country also does not
have patent protection and environmental laws. Hence, it is the need of the hour of promoting, developing and
financing the biotechnology through venture capital in India to make her to leap into the sea of development.
So venture capital funds should play their role very cagily in this regard by taking into consideration the incen-
tives offered by the government of India and SWOT of Biotechnology Industry (See Exhibit I & II) before
putting their investments in the grazing land of biotechnology.
Exhibit - I: Incentives for Investment in Biotechnology Industr y and Resear ch & Development
1. 100% foreign equity investment is possible in almost all sectors.
2. 100% foreign equity investment is automatic in drugs and pharmaceuticals sector, and over
74%is on case-by-case basis.
3. Fast Tract Clearence route for FDI.
4. Depreciation allowance on plant and machinery setup, based on indigenous technology.
5. Customs duty exemption on goods imported for use in government-funded R&D projects.
6. Customs and excise duty exemption to recognized scientific and industrial research organiza-
tions.
7. 125% tax deduction on R&D expenditure.
8. Three-year excise duty waiver on patented products.

9. 100% rebate on own R&D expenditure.
10. 125% rebate if research is contracted in public funded R&D institutions.
11. Joint R&D projects are provided with special fiscal benefits.
Source: www.techno-preneur.net and www.dbtindia.org

Exhibit - II: SWOT Analysis
Trained manpower and knowledge base, Good network of research laboratories,

Rich biodiversity, Well-developed base industries, Access to intellectual re-
STRENGHTS sources of NRIs in this area, Extensive clinical trails and research access to vast
& diverse disease populations, Bio-diversity – India’s human gene pools offer
and exciting opportunity for genomic.
Missing link between research and commercialization, Lack of Venture Capital,

WEAKNESSES
Relatively low R&D expenditure by industry, Image of Indian Industry.
Large number of patients covering wider range of diseases, Large Market, Ex-
OPPORTUNITIES port Potential Base for contract research for international companies due to ris-
ing costs of R&D abroad.
THREATS Danger of anti-biotech propaganda gaining ground and IPR policies.
Source: Investor Intelligence – July-August 2002.
Exhibit - III: Budgetar y Allocations of Major Funding Agencies in India (Rs. Million)
1990-91 2000-01
Department of Scientific and Industrial Research (DSIR) 131.3 583.8
Department of Science and Technology (DST) 2588.9 7798
Department of Biotechnology (DBT) 655 1361
Indian Council of Agriculture Research (ICAR) 3236 13990
Indian Council of Medical Research (ICMR) 396 1470
Council of Scientific and Industrial Research (CSIR) 2351 9120
University Grants Commission (UGC) 3495 14070
Source: RIS based on budgetary papers of relevant years, Ministry of Finance, Government of India.
REFERENCES
[1] Clive James (2003) Global Status of Transgenic Crops.
[2] Ernst and Young (2003) Beyond Borders: The Global Biotechnology Industry Report, Ernst and Young, New York.
[3] Gaisford J.D, Hobbs J.E, Kerr W.A., Nicholas P., Plunkett M.D. (2001) The Economics of Biotechnology 246 pp.
Edward Elgar (publ.).
[4] John K., Hine D. and Barnard R. (2004) Towards definition of the global biotechnology value chain using cases form
Australian biotechnology SMEs. Int. J. Globalisation and Small Business, Vol. 1, No.1, 2004,
[5] Kanter, R.M. (2003) Managing Transitions and Minimizing the Disruption Caused by Change
[6] Porter, M.E. (1990) Competitive Advantage of Nations, Macmillan Press Ltd, London.
[7] Rao, S.R. (2003a) Indian Biotechnology Developments in Public and Private Sectors – Status and Opportunities.
ABDR 5:1-14
[8] Rao, S.R. (2003b) Status of regulation of genetically engineered products in selected countries – an analysis. ABDR
6:23-37
[9] Rao, S.R. 2002a Transgenic Plants: Biosafety and People – J.Plant Biol., Vol.29 (1), pp.1-8
[10] Rao, S.R. 2002b. Industry Feature – Time for Action. Times Global Journal on Indian Biotechnology. 30-33 pp.
[11] Roussel, P.A., Saad, K.N. and Erickson, T.J. 1990. Third Generation R&D, managing the Link to Corporate Strategy.
Boston: Harvard Business School Press.
[12] www.bioportfolio.com http://www.bioportfolio.com

Employee Psychology Vis-a -Vis Flexible Work Arrangements

in IT Sector
1
Mrs.D.Sucharitha, 2Abhishikth Sandeep.A, 3Dr.J.U.Maheswar Reddy
Abstract: This paper seeks to highlight the impact of flexible work arrangements (FWA) prevalent in the IT
sector, dwelling upon the psychological aspects and also gain familiarity about various psychological prob-
lems faced by IT sector employees and the manner in which FWA’s can come to their rescue. The paper shows
that when FWA is introduced in an organization there is a drastic decrease in psychological problems, which
in turn leads to increase in productivity in the organization, the bottom line being that FWA is not about work-
ing less but is all about working differently and that FWA benefits both employees and employers.
Keywords: FWA, IT sector, Employee, Employer, work flexibility, psychological.
I. INTRODUCTION
Flexible Work Arrangements (FWA) may be defined as employer-provided benefits which permit em-
ployees a level of control over when and where they work, outside of the standard working day (Hill et al.,
2001). Several studies have found that FWA enables individuals to integrate and overlap work and family
responsibilities in time and space, leading to a positive spillover, and is instrumental in achieving a healthy
work-family balance (Hill et al., 2003).
'Flexibility' is not only an adaptive process to contextual constraints. It is a strategic management tool.
Hence, flexi work is a powerful business tool and a key component of successful management practice which
to a great extent eases the psychological pressure on employees, more so, in cases where income earning
through their occupation holds value and image for them in both, their family and social life. It is a matter of
grave importance, especially in the Indian context, where familial and family ties are accorded the highest pri-
ority. When an employee is put in a situation where he/she is forced to sacrifice his/ her career, personal likes,
etc., it might cause an adverse impact either on the individual himself/herself and or on their family. At this
stage the employees look for emotional balance in terms of psychological backing, leading loss of focus on
work-life balance. Hyman et al. (2003) observed that organizational pressures, combined with lack of work
centrality, result in work intruding into non-work areas of employees’ lives. Such intrusions often manifest
themselves negatively on the employees. Today, employees not only look upon work as a necessity, but as a
source of personal satisfaction as well. Flexible work arrangements (FWA) provided by employers include
arrangements such as flextime work schedules, telecommuting, job sharing, compressed work week etc. which
permit employees some level of control over when, at what time and where they work. Flexibility to schedule
daily work gives employees more sense of control over their hours of work thus giving employees the ability
to respond quickly to family emergencies and meeting responsibilities at home during the non-core hours be-
sides helping them avoid rush hours, thereby reducing commuting time (Gottlieb et al.1998).
1
Research Scholar, JJT University,Rajastan
E-mail: scharitha@gmail.com
2
Associate Professor, ASTI, Hyderabad
E-mail: abhi_sandeep@rediffmail.com
3
Professor & Pricipal, HITS, Hyderabad
E-mail: jureddy56@gmail.com
13
▪ Employee Psychology Vis-a -Vis Flexible Work Arrangements
in IT Sector
According to Baltes et al., (1999), flextime arrangements are perceived as reducing tardiness, absenteeism
and turnover. Findings from research studies show that FWA is effective in enabling individuals integrate
their work and family responsibilities within their personal time and space and are instrumental in achieving a
healthy work-family balance. Work place flexibility basically means defining work differently. Information
Technology, one of the fastest growing sectors in Indian industry, contributes close to 16% to India’s GDP.
The IT industry in India has evolved into a technology powerhouse to be reckoned with, and India is now
emerging as an innovation and research hub. Information Technology (IT) is a growing global industry with
new ventures and new job avenues showing consistent business growth. This demand round the clock work
culture introducing profound work life balance issues and work culture deviations. Today, with the growth of
new geographically diverse markets and ever-increasing competition it is imperative for companies to acceler-
ate innovation and optimize productivity to stay ahead of the curve, FWA is one among the many management
techniques being implemented by the IT sector, and is reported to be resulting in immense benefits to the or-
ganizations in terms of reduced labor turnover, reduced rate of absenteeism, higher employee morale, in-
creased commitment of employees etc. Thus, the new HR strategy of flexible work arrangements looks at max-
imizing employee engagement and thereby promoting innovation by affording flexibility in workplace.
II. FOCUS ON FEW MAJOR ASPECTS

A) Health Issues:
Various health issues that most IT employees are reported to be suffering from are stress, sleeplessness,
headache, fatigue, sense of exhaustion, lack of concentration etc. Long working hours a combination of heavy
workload-working to deadline schedules and lengthy travel time to and from their offices are taking a heavy
toll on the health of employees. On an average an employee puts in about 11-12 hours of work per day and at
times it reaches 14 hours. Such “Emotional” exhaustion adds to the physical and mental strain of the workers,
leading to higher levels of stress. In this case flextime can be implemented by varying the start and end time of
a standard day around core hours either on regular basis or daily adjustments. Some of the various methods in
which Flexible Work Arrangements work are:-
- Job sharing: Two employees shar ing the duties and/or hour s of wor k at the wor k place.
- Part-time: Wor king par t time involves wor king for less than the full- time schedule with a corre-
sponding reduction in pay and benefits. Staggered shifts and compressed work schedules save the trouble of
undertaking trips at peak hours.
- Phased Retirement: Wor king par t –time in an honorary position or stepping down to a less responsi-
ble position in preparation for retirement.
- Phased return from leave: Wor king a par t time schedule with a gradual incr ease to full-time sched-
ule when returning from a leave of absence (eg: maternity/paternity leave, short term disability, long –term-
disability)
- Telecommuting/Tele work: Telecommuting is defined as ‘Periodic work out of the principal office
one or more days per week, either at home, a client’s site or in a ‘tele-work center’ (Nilles, 1998). Options like
telecommuting and work from home reduce the need to commute and cut down on fuel costs in addition to
contributing towards reduction in environmental pollution. Thus facilitating working from home or another
alternative location on a regularly scheduled basis. This is emerging as the most preferred option, especially
amongst women employees as it allows them the flexibility to juggle between work and home, besides devot-
ing more time for taking care of young children. This option helps reduce stress as it does not require employ-
ees to commute long distances to the work place.
- Virtual work: Wor king in an entir ely goal – driven environment with no defined work schedule or
work place it has been found that, given an opportunity, 78% of women respondents prefer to work from the
home as part of the FW arrangement. While only about 30 % of male respondents preferred the same.
B. Social Issues:
Simultaneously, family life is also becoming more complex. The extended family, even in India, is slowly

in IT Sector ▪
disappearing (Patel 2005). Small nuclear families have come to stay, where both the spouses go to work. In
addition, there are an increasing number of single parent households due to increased divorce rate. These asyn-
chronous changes in working and family life result in a need for employees to continuously attempt a balanc-
ing act. Quite often work intrudes on family and social life, while at other times family pressures affect work
performance (Fu and Shaffer 2001). Work-life balance is a broad concept including proper prioritizing be-
tween "work" (career and ambition) on one hand and "life" (pleasure, leisure, family and spiritual develop-
ment) on the other. Related, though broader, terms include "lifestyle balance" and "life balance". Poor work
life balance leads to many disastrous things like tardy/ bad performance, lack of motivation, more errors, ab-
sence from work and so on. The worst thing is that poor work-life balance reduces work quality and productiv-
ity without any doubt. When an employee is able to not able to give time to his family at home, he will feel
stressed out at work. Work place flexibility gives the employee the freedom to choose the when, the where,
and how the work gets accomplished, Thus considerably reducing stress levels besides facilitating the employ-
ee to balance his/her work and personal life. In the process enhancing his ‘Quality of Life”.
C) Personal Issues:
An employee’s stress levels at the work place are directly related to the employee’s
1. Gender.
2. Age.
3. Ability to cope with Physical stress of the job.
4. Relationships with peers and managers.
In all the above circumstances it is proven that work place flexibility options have been proven to deliver
the desired results, these options provide a number of alternative work structures which alters the time and / or
place that work gets performed on a regular basis. Recent studies and reports from hospitals indicate that most
IT employees are suffering from psychological problems, depression being the most prevalent. This was fol-
lowed by hallucination. The third psychological problem is reported to be loneliness. A large number of em-
ployees were victims of sleeplessness- this problem was found to be aggravated especially on weekends, ow-
ing to the fact that employees are at a loss to comprehend what is to be done, as their biological clocks would
have got used to being awake at nights .FWA’s allow flexibility in scheduling of hours worked, the amount of
hours worked and /or the place of the actual work.
III. BENEFITS TO THE ORGANIZATION

Employers offer flexible work arrangements for a variety of reasons. According to a survey by Hewitt
some of the reasons why employers offer these arrangements are:
A) To increase Retention:
Acceding to the requests of employees who may be negatively influenced by one or more of the factors
mentioned above.
B) Increase Productivity:
Improve attendance and reduce labor turnover. In the light of numerous studies reflecting on the stressful
conditions of work in the IT sector, employees are being encouraged to take care of themselves by taking re-
course to FWA. In addition employees are encouraged to pursue their interests, go in for stress management
offerings, take to fitness centers and classes, nutrition counseling, employee assistance programs and attend
workplace wellness programs which ensure a stress free mind while also improving employee mental and
physical health so that the employee can concentrate while at work, enhance productivity, and ultimately con-
tribute to an organization’s bottom line.
Research shows that flexibility contributes considerably towards better work-life balance of employees

▪ Employee Psychology Vis-a -Vis Flexible Work Arrangements
in IT Sector
which is held at priority by the young and upcoming working population. This in turn imparts the three-fold
advantage of higher job satisfaction, greater productivity and lower attrition. Higher job satisfaction comes
from a sense of good balance between work and life. This contributes towards decreased stress levels and
therefore fewer sick leaves.
Figure-1: Factor s influencing Wor k Life Balance Envir onment of IT employees in India.
IV. CONCLUSIONS
The aim of FWAs should be no only to decrease Work Family Conflict and enhance work life balance, but
take it one step further by looking at positive outcomes (e.g. engagement, facilitation) of these arrangements
when they are combined with the appropriate organizational culture. As proven by research, FWA solutions
enhance productivity and efficiency of the employee by giving them the freedom to choose their most produc-
tive work time. While this implies reduced healthcare costs for the employee, it extends the benefits of busi-
ness continuity, reduced attrition, replacement and facilities cost for the employer.
In sum, each of these flexible work arrangements has some advantages and disadvantages for the employ-
ee and the organization, and what is good for the individual is not always good for the organization and vice
versa. Furthermore, Grant et al., (2007) have found that managerial practices frequently causes wellbeing trade
-offs by enhancing one aspect, such as psychological wellbeing and decreasing another aspect, such as physi-
cal wellbeing. Some practices, while increasing employees’ control and job satisfaction may undermine their
health by leading to overload, fatigue, and strain. All these issues should be considered when implementing
FWAs.
Research on FWAs suggests that they have positive outcomes such as lower work-family conflict
(Anderson et al., 2002), and better work-family balance (e.g. Eby et al., 2005). Use of FWAs is related to pos-
itive outcomes for organizations such as lower staff turnover (Dalton and Mesch, 1990) and increased job sat-
isfaction (Scandura and Lankau, 1997). Furthermore, a meta-analysis conducted by Baltes et al. (1999)
demonstrated that FWAs were positively related to employee productivity, satisfaction with work schedules
and overall job satisfaction, and negatively associated with absenteeism.
Psychological problems arise due to overburden of the work pressure on the employee, so it is opined that
introduction of FWA is the best remedy to overcome such problems. It is desirable that the FWA must include

in IT Sector ▪
some aspects like job sharing, compressed work week, career breaks, sabbatical, part-time, telecommute op-
tions, and phased return from leave (maternity, short term disability, long term disability). There is a need for
more guidance to employees who are affected with these problems. Further this study conclude that even the
employers in who are in higher position in hierarchy should come forward to structure FWA arrangements
which are a boon to both employees and employers. However the study was made more extensive by studying
various psychological problems categorically and providing remedial solutions. A comparative study between
the various social, Physical health and emotional problems can also be made. For Organizations fighting it out
in this competitive market to hire and retain the best, FWA is certainly turning out to be trump card. Employ-
ees are often reluctant to take advantage of work-life programs due to their fear of the negative consequences
that may be caused to their career progress. FWA’s are not about working less, but are all about working dif-
ferently.
REFERENCES
[1] Bhattacharya* Donald e. Gibson Charles f. Dolan - The effects of flexibility in Employee Skills, Employee Behav-
iors, and Human Resource Practices on firm performance, Journal of Management, vol. 31 no. 4, August 2005 1-19
doi: 10.1177/0149206304272347 © 2005 Southern Management Association.
[2] Trends in HR and employee benefits, Change is in the air: Flexible Work Arrangements @2009 Hewitt Associates
Llc.
[3] V. Ramanathan, & A. Vanitha , Work life balance – A primitive channel source for the work culture at work place
with special reference to IT employees in India, Indian Journal of Commerce & Management Studies ISSN – 2229-
5674.
[4] Cali Williams Yost, CFOs see business impacts of work – life flexibility, but they can’t Execute for strategic bene-
fit@2009 work life journal second quarter.
[5] Zinnov, Flexible work arrangements modeler concept and frame work definition.
[6] Marie Schots, Laurent Taskin – Flexible work timings: Towards a new Relationship?
[7] Mina Westman – Flexible working time arrangements and their impact on work-family interface and mental wellbe-
ing – UK Government’s foresight project mental capital and wellbeing – Government office for science.
[8] Smita R. Chavan & Balkrushna Potdar - A critical study on work-life balance of BPO employees in India - Interna-
tional Conference on Technology and Business Management, March 28-30, 2011.

Performance of Indian Manufacturing Sector

1
R. Naveen Kumar
Abstract: Manufacturing is the backbone of every economy and its global competitiveness is important for
its success in the present context. Mergers and Acquisitions in manufacturing sector in India has become a
great and fascinating issue in recent times due to changing economic equations over the world and increasing
competitiveness of the industry. The research paper is a modest attempt to discuss the state of Indian Manu-
facturing Sector and trends in the sector along with the measures need to be initiated by both industry and the
government for further development of the sector.
I. INTRODUCTION
Manufacturing sector, the secondary sector of industry that generally takes the output of the primary sec-
tor and manufactures finished goods or products to a point where they are suitable for use by other businesses,
for export, or sale to domestic consumers. This sector is divided into light and heavy industry; most of these
industries consume large quantities of energy and require factories and machinery to convert the raw materials
into goods and products. These industries produce waste materials and heat which may create environmental
problems or create pollution. Divisions of this sector include Aerospace manufacturing, Automobile manufac-
turers, Brewing industry, Chemical industry, Engineering, Energy industries including the production of pe-
troleum, gas and Electric power, Steel production, Tobacco industry, Radio and Telephone industry, etc.
India's manufacturing sector has been rightly recognized as the main engine for economic growth and ac-
cordingly, emphasis was placed on the growth of the industry in most of our Five Year Plans. But the share of
manufacturing has been stagnating at a low level of 17% of GDP for over two decades. Of the major reasons
for the reduced level of contribution is the inability of the country to build and maintain competitiveness need-
ed to meet the global challenges as well as to develop a larger domestic market. For achieving a 12% growth
rate in manufacturing, the government needs to create appropriate conditions where there is a consistent level
of investment both in manufacturing and in infrastructure. The policies should increase job opportunities with-
out sacrificing competitiveness. Another aspect which is hampering growth is the domestic indirect taxation.
It would be better to work towards a national VAT that would run parallel at both Central and state levels in
the absence of a GST.
Manufacturing played an important role in sustaining India's economic growth in the 1970s and 1980s.
But the economic reforms of the early 1990s did not lead to sustained growth of the economy through manu-
facturing sector. But after acceleration in the mid-1990s, growth slowed in the decade's second half. Hence,
the growth rates of the Indian manufacturing sector in 2000-01 and 2001-02 were vastly different, while the
sector grew 5.3 per cent in 2000-01, it grew by 2.8 per cent in the following years. Similarly, the domestic de-
mand conditions were virtually the same in those years.
In 90’s, by and large manufacturing sector exports increased at a trend annual rate of 10.6 per cent. This
growth rate was a little bit higher than the overall growth rate in exports at 9.8 per cent. Within this period we
can find a stark difference in the growth rates. While the growth of manufacturing exports was at 13.7 per cent
per annum during the first half, and when slowed down to 7.1 per cent during the second half. This turn down
was in line with the slower growth of world trade, set-off by the Asian crisis. Therefore, India's exports of
manufactured products currently stand at close to $35 billion and have grown over the years with a wide ebb
and flow.
1
E-mail: naveenachari@gmail.com
18
Performance of Indian Manufacturing Sector ▪
As the manufactured products' exports have increased at a quicker rate than overall exports, the share of
manufacturing in India's exports has increased progressively from 52 per cent in 1970, 59 per cent in 1980 and
71 per cent in 1990 to 77 per cent in 2000-01. It reflects that the transition in India's export basket for the most
part from agro-based raw materials to processed items. So, the export-orientation of the Indian manufacturing
sector has also been on the rise, and the ratio of manufacturing exports to GDP from the manufacturing sector
has gone up from 20.5 per cent in 1987-88 to 52.7 per cent in 2000-01. The increase in ratio purely reflects the
increasing export orientation of the manufacturing sector, which is not an actual measure of export orientation.
On the other hand, the ratio, based on these estimated numbers, also shows a steady increase during the
1990s, where manufacturing exports accounted for a little over 5 per cent of the value of output in the same
year that has increased now to close to 10 per cent. Despite the growth witnessed so far, India's contribution to
world trade remains very small. In 1999, total world exports of manufactured products were $4,224 billion of
which India had a share of just 0.7 per cent, which is only a marginal increase from 0.55 per cent in 1992.
Even within the group of developing countries, India's manufacturing exports account for just 2.6 per cent that
has remained largely steady during the 1990s.
Ten years down, in the course of the post reform era, due to the sluggishness pull the Indian industry was
struggling to find its place in today's globalized world. A long-term strategic direction for the Indian industry,
increasing its quality and cost competitiveness, enhancing its ability to absorb technological advances and
adopt innovative management practices and build industry's overall capability to face the pressures of open
global market competition still remain among key issues that need to be wrapped up. The glut of developments
in the wake of fast-track economic reforms initiated in 1991 have further reinforced the need to deepen the
reform process at the enterprise level itself. As anticipated, there is clearly a sense of paradox about the cur-
rent situation in the Indian manufacturing sector and economy at large. While there are ample signs of resur-
gence in several segments, especially those in sync with global market dynamics, the macro-level statistics on
industrial performance still paint a mood of diffidence. While IT, pharmaceutical, automobiles, and fast mov-
ing consumer goods (FMCG) sectors have shown unprecedented growth in the past five years, conventional
sectors like engineering goods, chemicals and small scale manufacturing, that had strong presence in Indian
economy, have been on decline, bearing the brunt of new global competitive pressures. In particular, the gulf
in the manufacturing sector, between those companies coming forward to accept challenges of restructuring
and those unable to wriggle out of the past inertia, point towards a deeper revamp process underway in the
Indian industry.
However, Indian manufacturing sector with other major Asian countries, in comparison shows that the
size of the value added in the Indian manufacturing sector ($ 66 billion in 2000) was less than one fifth of the
Chinese manufacturing sector ($ 373 billion) and even less than half of the Korean manufacturing sector ($
144 billion). Share of the manufacturing sector in India's GDP has remained stable at around 17% while in
China the manufacturing sector accounted for around 35% of the GDP and in the case of Korea, it was 31 %.
Hence, the manufacturing sector grew at an average annual rate of 6% in the 14 years between 1990-91 and
2003-04. This was higher than the 5.8% growth in Industry and the 5.7% GDP growth during this period. Nev-
ertheless, manufacturing sector growth has fallen sharply in the last seven years as compared to the first seven
years of the reforms period. It has declined from 7.4% to just 4.7% later.
II. GROWTH IN THE INDIAN MANUFACTURING SECTOR

Manufacturing sector growth in India has fallen sharply in the last seven years as compared to the first
seven years after the reforms. Manufacturing sector growth slumped from 7.4% in the first seven years of re-
forms (1990-91 to 1996-97) to just 4.7% over the last seven years (1997-98 to 2003-04). Its growth in the last
seven years was lower than the 5.1% growth clocked by industry or the 5.7% growth of GDP during the peri-
od. It is due the growth of manufacturing sector at 12.3 percent , the Indian economy has registered 9.4 per

▪ Performance of Indian Manufacturing Sector
cent growth in the year 2006-07 (Table-I ).
Table-I: Annual gr owth r ate of Industr ial Pr oduction

Period Manufacturing Overall
1995-96 14.1 13
1996-97 7.3 6.1
1997-98 6.7 6.7
1998-99 4.4 4.1
1999-00 7.1 6.7
2000-01 5.3 5.0
2001-02 2.9 2.7
2002-03 6.0 5.7
2003-04 7.4 7.0
2004-05 9.2 8.4
2005-06 11.6 9
2006-07 12.3 9.4
Source: CSO.
III. COMPETITIVENESS OF THE INDIAN MANUFACTURING SECTOR

Manufacturing sector has been able to make major forays into the global markets over the last two dec-
ades, though the rate of growth has not been very impressive. It is found that 50 major manufactured products
whose share in the global markets has improved significantly between 1980 and 2000. The share of these 50
products in India's total merchandize exports has gone up from 40.3% in 1980, to 50.9% in 1990 and further to
57.4% after 1990. The major and important 47 manufactured products where India's share in global trade has
improved over the last two decades have been shown here in Table – II.
Table-II: India' s shar e in global tr ade for the major 47 manufactured products
Export value ($ million) Share in global exports (%)

SITC
1980 1990 2000 1980 1990 2000
Pearl, prec, semi-prec stones 579 2710 6477 3 10.97 13
Textile articles nes 273 341 1161 7 3.99 1
Floor coverings, etc 196 454 650 4 5.41 1
Under garments non-knit 111 424 1021 4 6.06 7
Developed cinema film 17 8 25 6 2.29 7
Textile yam 56 360 2003 0 1.55 6
Cotton fabrics, woven 351 571 1103 5 3.76 6
Synth dye, natrl indigo, lakes 46 179 470 1 2.34 5
Women's outwear non-knit 271 1023 2137 3 3.99 5
Gold, silver ware, jewellery 17 179 1019 0 1.36 5
Other organic chemicals 12 45 529 0 0.65 4

Lime, cement and building Prdts 9 42 402 0 0,56 4

Iron, steel castings unworked 4 42 171 0 1.6 4
Headgear, non-textile clothing 17 321 529 0 3.31 4
Other fixed vegetable oils 25 40 197 1 1.12 3
Pesticides, disinfectants 1 58 270 0 0.79 3
Base metal household equip 35 37 378 1 0.64 3
Travel goods, handbags, etc 17 134 350 1 2.11 3
Under garments knitted 43 277 1088 1 2.33 3
Textile clothing accessories 38 109 300 2 2.28 3
Woven man-made fib fabric 39 156 506 0 0.72 2
Lace, ribbon, tulle, etc 12 14 81 1 0.51 2
Pig iron, etc 2 42 140 0 0.61 2
Iron, steel wire, excluding wire rod 7 25 60 0 0.76 2
Outer garments knit non-elastic 82 293 675 I 1.17 2
Processed animl and veg oil, etc 8 6 34 1 0.31 1
Hvdrocarbons nes, derivatives 1 32 159 0 0.2 1
Alcohols, phenols, etc 0 24 162 0 0.3 1
Carboxylic acids, etc 2 12 226 0 0.12 1
Organo-inorgan compounds, etc 0 24 173 0 0.2 1
Inorg chem elmnt oxides, etc 5 21 96 0 0.17 1
Other inorganic chemicals 17 39 95 0 0.48 1
Explosives, pyrotechnic prdts 1 2 9 0 0.12 1
Prdts of condensation, etc 1 9 165 0 0.06 1
Starch, inulin, gluten, ete 1 1 52 0 0.03 1
Rubber mtic1es nes 10 22 93 1 0.46 I
Glassware 10 15 57 0 0.23 1
Iron, steel primary forms 3 32 180 0 0.16 1
Iron, steel shapes, etc 7 60 176 0 0.31 1
Iron, steel univ, plate, sheet 3 47 597 0 0.11 1
Iron, steel tubes, pipes, etc 59 40 156 0 0.21 1
Aluminum 11 86 286 0 0.3 1
Tin 0 1 14 0 0.06 1
Structures and parts nes 38 15 85 0 0.17 1
Wire products, non-electric 12 .17 55 1 0.47 1
Electro-medical, x ray equip 1 5 92 0 0.07 1
Office supplies nes 3 6 78 0 0.13 1
Musical instruments and parts 4 26 363 0 0.14 1
Source: UNIDO.
IV. POST-REFORM TRANSITIONAL TRENDS OF THE SECTOR

▪ Performance of Indian Manufacturing Sector
M&As phenomenon with its basic challenges of restructuring of equity, debt and management controls is
now cutting across the entire field of industry and is acting as a curtain raiser on more concrete processes of
business process restructuring. Global quality standards have made improvements in productivity and rebuild-
ing cost-inefficient systems of manufacturing as a must of survival and growth for the Indian industry that was
facing the severe import competition in all most all segments. Strategic value drivers in the industry are now
entrenched in the logistics and supply chain pipeline, with focus on just-in time inventories, shorter production
turnaround time and smart outsourcing strategies that can cut down distribution and procurement costs. Adapt-
ing to information technology as key competitive tool in managing the business processes, both within and
outside the enterprise, effectively redefining the manufacturing systems and supplier and customer-led busi-
ness processes.
It is due to the strength of the sector, an increasing number of Indian manufacturing firms are spreading
their wings across continents by acquiring companies overseas. The trends on the same through data have also
shown that an overwhelming number of cross border transactions pertained to the automotive, pharmaceutical
and even FMCG/packaging industries are taking place. Hence, it is clear that a number of Indian companies in
the sector are now increasingly going for overseas acquisitions that is mostly because many American and
European manufacturing firms who find it difficult to competitively operate in face of competition from lower
cost countries such as China and India. So, in the post reforms period, it is observed that a significant number
of mergers in large, intermediate and small scale industries of Manufacturing Sector in India with overseas and
domestic companies. The merger activity in the sector from 1999-2000 to 2005-2006 in terms of percentage by
sectors can be seen from Table-IV.
Table-IV: Str ategic M&As - Sector wise breakup

Automotive 3%
Others 19%
Telecom 11%
Pharma, Healthcare & Biotech 12%
Oil & Gas 2%
Media & Entertainment 3%
Banking & Financial 7%
Chemicals & Plastics 6%
Electrical & Electronics 4%
Energy 7%
FMCG, Food & Beverages 7%
IT & ITeS 14%
Manufacturing 5%
Source: Bloomberg & PWC Analysis.
The tables show that merger activity occurred mainly in the manufacturing sector. In the sector, merger
activity took place mainly in the food and beverages, metal products and the chemical manufacturing sub-
sectors. In the previous year where merger activity peaked in the equipment and machinery sub-sector, fol-
lowed by the other manufacturing sub-sectors and the chemical sub-sectors. Only the chemical sector has con-
tinued the tempo and lay bare the trend of high merger activity.
On the other hand, mergers in the food and beverages, building materials, printing and publishing, and

metal products sub-sectors have also increased, but none of these sub-sectors has experienced a significant
increase in activity. Merger activity has increased significantly in the financial services sector, followed by the
real estate sector and the mining and construction sector. Hence, in India, the trend of M&A activity across
sectors showed a declining trend and in the past three years, the first half of 2003 has been the least active half
year with only 119 deals compared to 172 in the first half of 2002, which is a fall of 31 per cent. In value
terms, the total deal size in the first half of 2003 has been $1,431.59 million, almost 50 per cent less than the
figure of $ 2,756.2 million in the first half of 2002.
In the first half of 2003, the manufacturing sector accounted for 35 per cent of the number of transactions,
followed by the services sector at 21 per cent and the banking and financial sector at 12 per cent. In value
terms, the manufacturing sector contributed 30 per cent, followed by information technology 18.5 per cent and
the services sector 16 per cent. In the year 2003-04, the largest deals worth more than $100 million have been
the merger of Indo Gulf's metals business with Hindalco ($240 million), the acquisition of Gujarat Adani Port
by Peninsular and Oriental Steam Ltd ($135 million), the acquisition of Mangalore Refineries by ONGC ($125
million) and the acquisition of Hughes Tele.com by Tata Sons ($106 million). Hence, various research studies
on M&As over the world shows that the number of M&A deals are down by 33 per cent during the current
year.
VI. CONCLUSION
Growth of any economy will depend on its strength in manufacturing sector but not services sector alone
as its contribution is intangible in nature. As manufacturing is the backbone of every economy and a tool for
global competitiveness, every country should strive hard to excel in manufacturing in the present context. If
India is to achieve an overall growth of 8% per annum, it is essential that both manufacturing and services
grow at more than 11%. Mergers & Acquisitions in the sector is a welcoming feature that boosts the strength
of the Indian economy a lot. Not only that, even the mergers and acquisitions of manufacturing sector in India
will also help the economy in a better way in making it to leap in to the world of development provided the
requisite environment by the government. So the enterprises should set down latest manufacturing technolo-
gies and adopt appropriate downsizing and outsourcing initiatives on a cost-effective basis to march towards
excellence.
REFERENCES
[1] Dennis Carey - A CEO Round Table On Making Mergers Succeed, Harward Business Review, May – June 2000
[2] Larry Selden & Goeffrey Colvin - M & A Needn’t Be A Losers Game, Harward Business Review, June 2003
[3] Joseph L.Bower - Not All M & A’s Are Alike And That Matters Harward Business Review, March 2001.
[4] Pratap Chandra Tripathy - Strategic A lliances: For Competition A nd Co-Operation, Indian Journal of Marketing
[5] Ramesh Mashelkar - Manufacturing Technology In India – The New Challenges, Vikalpa, Vol. 23, No.3, July – Sep-
tember 1998.
[6] Pankaj Chandra and Trilochan Sastry - Competitiveness Of Indian Manufacturing- Findings Of The 1997 Manufac-
turing Futures Survey, Vikalpa, Vol. 23, No.3, July - September 1998.
[7] G Sunderraman - Complexity In Manufacturing - Some Lessons To Learn In Planning And Implementation, Vikalpa
vol. 23, No.3, July – September 1998.
[8] Satyanarayana Chary. T—Mergers and Acquisitions in Manufacturing Sector of India, published in International
Journal of Management Sciences (ISSN 0973-2101), June-December 2008 published by SIMS, Noida, India.

Private Equity in India - An Overview

1
P. Jaipal
Abstract: Private Equity has become the focal source of finance in recent past and started promising the
Indian economy a lot by promoting the new and innovative business ideas of first generationa and the budding
entrepreneurs. This paper is a modest attempt to discuss on the concept and the scenario of private equity in
India.
I. INTRODUCTION
Private equity is the ownership of shares or other equity or equity-like interests in companies that do not
trade publicly on a stock exchange, or over-the-counter, among investment dealers. As there is no instantane-
ous market for trading, these investments are appropriate only for patient investors with a long-term view.
Because the investments often involve the acquisition of a controlling interest or significant influence costing
several millions of dollars, private equity opportunities are generally more appropriate for large institutional
investors with the time and resources to evaluate the potential risks and returns, and the patience to wait 10
years or longer to maximize investment returns.
Private equity is essential to fuel the economy and nurture the budding entrepreneurs/technocrats. Not
only that, even private equity can work very well in making the country to excel in the total entrepreneurship
of the country that can contribute a lot for the nation. Hence, the main reasons for the need of private equity
are as follows:
1. Private equity firms often work in conjunction with other providers of finance and may be able to
help to put a total funding package together for the business .
2. Private equity firms also bring in required expertise in multiple functions.
3. The placement with reputed investor will further enhance the brand image of the company.
4. Private equity helps achieve ambitions of a company and provide a stable base for strategic decision-
making.
5. Private equity firms will seek to increase a company’s value to its owners, without taking day-to-day
management control.
6. Private equity firms usually provide higher valuations in normal Stock Market conditions and lower
valuations when Stock Market is booming.
7. Investors can also help company in improving and developing its business and strategies.
II. TYPES OF PRIVATE EQUITY INVESTMENTS

There are basically three types of private equity investments, they are:
1. Venture Capital, principally in early-stage companies that are still developing their products or ser-
vices, yet have the prospect of generating revenue in a few years; and later-stage firms generating
revenue with the expectation of profits within a year or two.
2. Buyout and Acquisition Financing usually accompanied by a new business plan, and occasionally
with new management, to improve a company's financial performance.
3. Expansion or Merchant Banking Capital to established companies looking to enter new markets or
achieve a larger scale of operations.
1
E-mail: puli.jaipal@gmail.com
24
Private Equity in India - An Overview ▪
III. HOW PRIVATE EQUITY WORKS?

Private equity fund managers raise money from investors with the aim of investing for long term in a port-
folio of potentially high growth private companies. The criteria for choosing Investee Company depends upon
the factors as
1. A superior business or idea,
2. Quality and depth of management,
3. Modern and robust corporate governance,
4. An appropriate way to invest in the company, and
5. A strategy for exiting the investment.
Private equity strategies vary widely with a focus on its maturity as it is not so fancy proposition for pro-
moters for various reasons, they are: Fear of losing the confidentiality and control over the company, private
equity is a high cost option, and Participation of outsiders to stick the nose in the business.
IV. STEPS IN THE PROCESS OF PRIVATE EQUITY

1. Screening of the Company
2. Short listing of possible investors to be targeted.
3. Preparation of preliminary information memorandum that is an executive outline covers Promoters,
Management and key managerial personnel, industry scenario, existing business of the company, fi-
nancial performance, ratio analysis, SWOT analysis, project details financial projections, investment
details and Returns and exit routes.
4. Data room setup that refers to compilation of authenticated statutory and other records of the compa-
ny to facilitate detailed due diligence by the advisor and investor for setting up of the quantitative
valuation.
5. Preparation of the Valuation Report.
6. Presentations and one to one meeting with investors.
7. Preparation of Confidential information memorandum.
8. Investor Negotiations.
9. Closure of the Transaction.
V. THE GRWOTH OF INDIAN PRIVATE EQUITY

The Indian private equity market has been getting more active by the day. During the last year or so, al-
most all the major global VC and PE firms have either established an on-ground presence in India or raised
significant India-dedicated funds. In 2006 PE investments levels increased by more than 300% to almost $7.5
billion from $2.2 billion in 2005. This quantum leap was not the result of a low base, but the Indian GDP
growth coming within striking range of double-digits. Annual growth rates of 7-9% are unheard of in mature
western economies. And global investors want high returns.
Furthermore, several key sectors of the Indian economy, viz, IT, BPO, Telecom, Pharma/Healthcare, Fi-
nancial Services, Retail and Automotive Components that are investment targets are experiencing even higher
growth than the said levels of growth rate. The other reasons for the same is well positioned economy that can
mine the opportunities of globalization, an increased appetite for innovation and entrepreneurship, well regu-
lated and fully functional capital markets and a spurt in consumerism powered by the young demographic pro-
file. Hence, the present scenario is very much creeping in nature as the falling rupee and other economic crisis
of the economy stood as hindrances for the growth and development of the private equity (see table I for top
PE players ).

▪ Private Equity in India - An Overview
Table-I: Top Ten Pr ivate Equity Deals

Deal Size
Acquirer Investee % Stake
($ Millions)
KKR Flextronics Software Systems 900.0 85.0
Temasek Holdings Tata Teleservices 330.0 10.0
Farallon capital Indiabulls Financial Services 143.0 N.A
Silver Peak Investment L&T Infrastructure 122.0 22.0
ICICI Venture, IDFC Private equity, Citigroup GMR Infrastructure 110.0 7.0
Abu Dhabi Investment Authority IL&FS 100.0 10.0
Siachen Capital Nitesh Estates 100.0 N.A
Morgan Stanley Matri Developers 68.0 N.A
General Atlantic Hexaware 68.0 N.A
ABN Amro & HSBC Investment Anant Raj Industries 66.7 N.A
Source: www. google.com
VI. EXIT ROUTES

1. Listing of Shares: The listing of shar es subsequently after public offer , is a well-linked route for
exiting, as it enable freely transfer of securities in open market.
2. Offer for Sale: The pr ivate equity investor may get out off the tr ansition by offer ing their hold-
ing to any other interested investor.
3. Sale to Strategic Investors: The pr ivate equity holder , if not r estr icted by the covenants of the
agreement, may sell their stake to any acquirer, who is interested in taking over the management of
the company.
4. Tag Along Rights: A contr actual obligation used to pr otect a minor ity shar eholder s. Basically,
if a majority shareholder sells their stake, then the minority shareholder has the right to join the trans-
action and sell their minority stake in the company.\
5. Management Buy-out: When the manger s and /or executives of a company pur chase contr ol-
ling interest in a company from existing shareholders.
6. Auction of Shares: The pr ivate equity investor may sell their stake in an open mar ket tr ansac-
tion by way of auction.
7. Buy Back by Promoters: The holding of outsider investor is being pur chased by pr omoter s
through buy back complying with the provisions of the Companies Act, 1956.
8. Merger with Listed Companies: The most popular way of exiting is mer ger or amalgamation of
Investee Company with any other listed company, enabling the shareholders to freely transfer the
shares in open market.
VII. CONCLUSION
Private equity is known as investing in securities through a negotiated process. The majority of private
equity investments are in unquoted companies. Private equity investment is typically a transformational, value-
added, active investment strategy. It calls for a specialized skill set which is a key due diligence area for inves-
tors' assessment of a manager. The processes of buyout and venture investing call for different application of
these skills as they focus on different stages of the life cycle of a company. Private equity investing is often
divided into the categories that have subcategories and dynamics provides a useful basis for portfolio construc-
tion.

Private Equity in India - An Overview ▪
REFERENCES
[1] Zider & Bob: How venture capital works? Hardward Business Review (Nov-Dec., 1998) (Ppl 131-139).
[2] I M Pandey; Venture Capital: The Indian experience prentice Hall of India Pvt., New Delhi.1996.
[3] Sandhya Prakesh: Venture Capital comes of Age, Indian Management, PPL 5-21(April 2000)
[4] T. Satyanarayana Chary: Venture Capital in India- An overview, Management Researcher, 2000, Tiruvanathapuram.
[5] T. Satyanarayana Chary: Venture Capital Industry-Issues and Measures for Development, Pratibimba, 2001.
[6] T. Satyanarayana Chary: Venture Capital Industry, JIMS 8M, Nov-Dec 2001.
[7] T. Satynarayana Chary: A Mission of Venture Capital in promotion of New Enterprises a study, Udyog Pragathi,
January-March 2005, the Journal of Practising Management, NITIE, Mumbai.
[8] T.Satyanarayana Chary: Venture Capital Concepts & Applications, Macmillan India Limited, 2005.

Inclusive Growth in India - A Mirror Image

1
Dr. D. Madhan Mohan, 2P. Sagar
Abstract: Established goals of free and open trade should develop more effectively the human and natural
resources of the country so as to attain sustainable growth and equitable development of economy, while re-
ducing economic disparities among the people and improving the economic and social well-being of the peo-
ple. Inclusive growth is an approach to economic development that is anti-protectionist, fuelled by market-
driven growth and facilitated by government. It is non-reactive and It does not just respond to immediate mac-
ro-economic concerns. It is a long-term strategy, extending across sectors and strata and focuses on produc-
tive employment rather than just income redistribution. The present paper is a modest attempt to converse on
the concept , causes for inequality, strategic needs and key elements of effective inclusive growth in India.
I. INTRODUCTION
India today is the world's fourth-largest economy of around a trillion dollars. Economic reforms initiated
in the 1990s have transformed the Indian economy from an inward-looking economy with moderate growth to
an internationally competitive and fast growing economy. Average annual growth has increased from 3.6%
during 1951-52 to 1980-81, referred to as the Hindu rate of growth, to an average of 6.6% during 1991-92 to
2010-11. The Indian economy, though achieved a high growth momentum during 2003-04 to 2007-08, could
not bring down unemployment and poverty to tolerable levels. Further, a vast majority of the population re-
mained outside the ambit of basic health and education facilities during this high growth phase. In recent dec-
ades, economic and social inequalities have increased alongside high growth rates that have worsened regional
inequalities. Over 25% of Indians continue to live in abject poverty.
Though the country is moving very fast in its growth path even by facing the shocks of global financial
crisis through its conservative approach, it has not succeeded in its attempt of ensuring the equality in sharing
the benefits of the growth to all sections of the people, more specifically the growth was not inclusive, which
does mean say that the benefits of globalization are not more evenly spread" in positioning the regions for
economic recovery and sustainable growth.
II. CAUSES FOR INEQUALITY

India has not achieved inclusive growth of the type which leads to a ‘Convergence’ along the income/
expenditure scale. The basic reason for this is that policy makers have in the country single mindedly pursued
the goal of high growth and have largely relied on ‘trickle down’ effects of growth on improving the living
standards of people at the bottom of the income ladder.
This is due to the difference in initial conditions at the start of the growth process in terms of levels of
human development and availability of infrastructure. Another interesting reason is the increasing gap be-
tween rural and urban incomes. Estimates say that the gap is increasing and rural incomes are now only about
half the level of urban incomes on per capital basis. The other drivers of in equality and poverty are found as
1
Professor & Principal,
Indure P.G College of Management, Bodan, Nizamabad.
2
Assistant Professor,
Department of Business Management,
Sri Chaitanya P.G. College, Karimnagar
28
Inclusive Growth in India - A Mirror Image ▪
1. Neglect of Agriculture and Rural Development.

2. Failure in Employment generation.
3. Under Investment in Human Development.
4. Consequences of Liberalisation and Globalisation.
IV. STRATEGIC NEEDS FOR EFFECTIVE INCLUSIVE GRWOTH

It is due to the above cited problems and issues of our country, Inclusive growth has become a national
policy objective of the Union Government. The 11th five-year plan (2007 – 2012) envisions inclusive growth
as a key objective. The Plan document notes that the economic growth has failed to be sufficiently inclusive
particularly after the mid-1990s. It has identified agriculture, infrastructure, health care and education as criti-
cal areas for achieving higher inclusive growth. Thus, the Eleventh Plan Document tries to restructure the poli-
cies in order to make the growth faster, broad-based and inclusive by reducing the fragmentation of the socie-
ty. Huge investments in agriculture, education and health, and rural infrastructure were the key elements of the
inclusive growth strategy as envisaged. Broadly, the policies aim at increasing the income and employment
opportunities on the one hand and on the other; it tries to finance programmes which are capable of making the
growth more inclusive. Ultimately, inclusive growth empowers individuals so that they are better able to reap
the benefits of globalization and to withstand future economic shocks. The following are the strategic needs
of the effective inclusive growth of India.
A) Increasing the Growth Rates of the Agriculture and Allied Sectors:

Agriculture and allied sectors at 18% share in GDP and more than half of the population as dependents
creeping in the country, hence, average income in agriculture is less than a quarter compared to the rest of the
economy. Unless growth in this sector accelerates along with a reduction in the number of persons dependent
on this sector, relative deprivation of this sector would persist.
Government has adopted a four-pronged strategy to revive this sector. The first relates to augmenting the
cropped area by raising irrigation and reclaiming wasteland. The second relates to input delivery consisting of
fertilisers, certified seeds, institutional credit and a revamped training and visit system to improve the yield
levels and to reduce spreads across farms and regions in productivity. The third concerns improving the in-
come levels. Instruments for that include support prices, agriculture insurance and encouraging value added
agriculture through agro processing, marketing and storage. The fourth is farm plus activities like animal hus-
bandry, horticulture and other related activities. The 11th Five Year Plan and the Union Budget 2007-08 have
taken several initiatives in this regard.
B) Improving the Share of Manufacturing:

The stable share of manufacturing often gives an impression that India is skipping the second stage of
growth. The growth of transport, storage, communications, insurance, banking, trade and real estate has to be
manufacturing driven. Apart from the enabling macro economic environment, what be critical for the sustained
buoyancy in manufacturing would be the investment in research and technology, removal of the current mis-
match in availability and need of skills, and removal of infrastructural bottlenecks - both of physical and social
infrastructure.
C) Improving Labour Participation Rate:

According to an ILO study, the labour force participation rate in India is not so significant comparatively
at 60.9% against to China at 82%. There is a need for faster employment growth for not only absorbing the
new entrants to the labour force but also to meet the rise in labour force due to a higher participation rate.
While a lower growth in labour force participation rate or a lower labour to population ratio in the short run
may give a lower unemployment figure, we cannot afford to forego the potential output from such a valuable
source.

▪ Inclusive Growth in India - A Mirror Image
D) Maintaining Price Stability:

The data from 1951-52 to 2006-07 indicate that in the four years of GDP growth of over 9%, average an-
nual inflation measured in terms of WPI was 3.9%. Inflation averaged 9.4% per annum in the four years when
GDP growth was negative. In the other 48 years, with GDP growth between 7 and 9% (12 years); GDP growth
between 5 and 7% (14 years); GDP growth between 3 and 5% (11 years); and GDP growth between 1 and 3%
(11 years) inflation averaged 8.6%; 6.6%; 5.2% and 4.9%, respectively. There does not appear to be any con-
sistent relation between inflation and growth. While it is difficult to indicate the level of inflation beyond
which it would start impinging on growth, tolerance to inflation may have declined over time, and a moderate
inflation is necessary for a moderate interest rate regime and stable exchange rate. It is well known that infla-
tion hurts the vulnerable sections the most.
E) Fiscal Consolidation:
The Fiscal Reforms and Budget Management Act provide the necessary institutional mechanism and a
roadmap. This will not only improve the credibility of the government and reduce the crowding out; but it will
also provide the needed fiscal space for allocating larger resources for capital investment, especially in social
and economic infrastructure.
F) Public Expenditure on Healthcare:

India’s public expenditure on health care, at 0.9 percent of the GDP, has been low even by developing
country standards. The corresponding share is higher in Pakistan (1.0), Bangladesh (1.5), Nepal (1.5) Sri
Lanka (1.8), and Bhutan (3.6) (UNDP 2004). India’s public expenditure on health has been not only low, but
has declined from 1.05 percent of GDP to 0.91 percent in the same period (GOI 2006c). Thus, the growth in
GDP did not translate into corresponding increase in public spending on health. By comparison, public health
expenditure in most of the OECD countries averages around five percent of their GDP (WHO 2006). India not
only spends less on overall health, but public expenditure favours the rich quintile of the Indian society
(NRHM 2006). One consequences of this imbalance is that skilled health personnel attend just 16.4 percent of
births among the poorest 20 percent compared with 84.4 percent in the richest 20 percent. Only 35 percent of
the population has access to medicines. At this stage of economic growth India needs to consider a new model
to extend access to healthcare including medicines to its entire population.
IV. KEY ELEMENTS

Based on the above analysis we can highlight the key elements of a strategy for achieving more inclusive
growth in India as follows:
1. Growth should take place in sectors in which the poor work (Agriculture Sector).
2. Growth should occur in backward and marginalized areas where the poor live. This is possible
through the investments of public sector initially in physical and social infrastructure.
3. Growth should use the factors of production that the poor possess and enhance their capabilities. It
can be done by encouraging the labour intensified industries and ensuring preferential credits and tax
treatment.
4. Growth should keep prices of goods and services consumed by the poor.
V. CONCLUSION
It is beyond-doubt that the fate of India as expected depends on the right strategy of inclusive growth. So
an inclusive growth strategy has to focus on sectors, areas, factors of production and items of consumption that
can play a pervasive role in alleviating poverty. Therefore, it is important to the policy makers to recognize the
particular groups’ excluded or marginalized from the process of growth. Special programmes or social safety
nets may need to be designed and put in place to target the empowerment of women, youth, and the landless,
casual workers in the formal sector, minorities and indigenous people and the aged and disabled.

Inclusive Growth in India - A Mirror Image ▪
REFERENCES
[1] United Nations Development Programme, 2006, Trade on Human Terms. Asia – Pasific Human Development Re-
port, Colombo, Sri Lanka.
[2] World Bank, 2007b, Globl Moniutering Report MDGs. Washington DC, USA
[3] World Bank, World Development Indicators data base.

Efficacy through Working Capital Management

(A Study of Venky’s India Limited)
1
Mohd Mujahed Ali
Abstract: Working capital management deals with maintaining the levels of working capital to optimum, be-
cause if a concern has inadequate opportunities and the working capital is more than required, the concern will
lose money in the form of interest on the block funds. Therefore, working capital management plays a very
vital role in profitability of a company. Many companies still underestimate the importance of working capital
management as a lever for freeing up cash from inventory, accounts receivable, and accounts payable. By ef-
fectively managing these components, companies can sharply reduce their dependence on outside funding and
can use the released cash for further investments or acquisitions. This will not only lead to more financial flex-
ibility, but also create value and have a strong impact on a company’s enterprise value by reducing capital
employed and thus increasing asset productivity. The present study is to investigate the empirical evidences of
Accounts Receivable, Accounts Payable, Inventory and Investments on Profitability by using Regression analy-
sis and bi-variate correlation analysis.
Keywords: Working Capital Management, Inventory, Accounts Receivables, Accounts Payables.
I. INTRODUCTION
A study of working capital is therefore of major importance for internal and external analysis because of
its close relationship with the current day to day operations of business. Working capital signifies the funds re-
quired for day to day operations of the firm. The management of current assets and current liabilities and the
interrelationship that exists between them may be regarded as Working Capital Management. It is concerned
with all aspects of managing current assets and current liabilities. Current assets are those assets, which in the
ordinary course of business can be converted into cash within a period of one year without diminution in the
value of assets and without disrupting the operations of the firm. They include cash and bank balances, ac-
counts receivables, stock of raw materials, work in progress and finished goods, short term investments, pre-
paid expenses and incomes outstanding. Current liabilities are those liabilities, which in the ordinary course of
business are expected to be paid within a period of one year. They include Accounts Payable, short term loans
taken, outstanding expenses and incomes received in advance. In accounting terminology, working capital is
the excess of current assets over the current liabilities. It is the difference between the inflow and outflow of
funds. The goal of the Working Capital Management is to manage the firm’s current assets and current liabili-
ties at a satisfactory level. The term “working capital” is often referred to “circulating capital” which is fre-
quently used to denote those assets which are changed with relative speed from one form to another i.e., start-
ing from cash, changing to raw materials, converting into work-in-progress and finished products, sale of fin-
ished products and ending with realization of cash from debtors.
II. REVIEW OF LITERATURE

The study of working capital management has not been received sufficient attention of the researchers
though it deserves it. Very few studies have been conducted in the past which are detailed below;
Smith et al (1973) has identified eight major theoretical approaches taken towards the management of
the working capital. He stresses the need for the development of a viable model with dual finance goals of
1
Asst Prof of Finance & Accounting, Alluri Institute of Management Sciences, Warangal.
E-mail: mubarak_mujahed@yahoo.co.in
32
(A Study of Venky’s India Limited) ▪
profitability and liquidity and argues that only such models will assist the practicing managers in their day-to-
day decision making.
Khorram et al (1994), proposed a unique solution to resource allocation problems by combining goal
programming with a qualitative forecasting model (e.g. the Delphi method) and a quantitative forecasting tech-
nique (e.g. the Poisson gravity model). In their model, the Delphi method is used initially to elicit the experts'
talents to derive the objectives to be considered in resource allocation, and subsequently a quantitative fore-
casting technique is used to predict the future values for these objectives. This information is then was used to
construct a goal programming model.
According to Moyer, Macguigan and Kretlow (1995), each of the working capital items (i.e. cash, receiva-
bles and inventories) helps in the management of firms in its own particular way and is used to keep the firm
liquid so that it is able to pay its obligations when they are due for payment and therefore it protects the firm
from bankruptcy.
As Cote and Latham (1999), argue that the management of receivables, inventory and accounts payable
have tremendous impact on cash flows, which in turn affect the profitability of firms.
Ghosh and Maji attempted to examine the efficiency of working capital management of Indian cement
companies during 1992 - 93 to 2001 - 2002. They calculated three index values - performance index, utiliza-
tion index, and overall efficiency index to measure the efficiency of working capital management, instead of
using some common working capital management ratios. By using regression analysis and industry norms as a
target efficiency level of individual firms, Ghosh and Maji [8] tested the speed of achieving that target level of
efficiency by individual firms during the period of study and found that some of the sample firms successfully
improved efficiency during these years.
Chakraborty and Bandopadhyay (2007) studied strategic working capital management, and its role in
corporate strategy development, ultimately ensuring the survival of the firm. They also highlighted how strate-
gic current asset decisions and strategic current liabilities decisions had multi-dimensional impact on the per-
formance of a company.
Singh (2008) found that the size of inventory directly affects working capital and its management. He
suggested that inventory was the major component of working capital, and needed to be carefully controlled.
Thus, it is found that a few studies have been undertaken on working capital management of the firms. It
is pertinent to note that so far no studies have been undertaken on working capital management of poultry in-
dustry. Hence, it made me to take up the present research work and I have selected Venky’s India Limited a
poultry company for my study which emerging as a leader in the poultry industry.
III. OBJECTIVES OF THE STUDY

1. To know the size of working capital to total assets in Venky’s India Limited (VIL).
2. To estimate the working capital requirements of VIL.
3. To study the relationship and impact of working capital components on profitability.
4. To offer suggestions based upon the study made on VIL.
IV. SCOPE AND LIMITATIONS

This study is carried on the basis of the data available of Venky’s India Limited, during the period 2001-
2012. The study is confined to understanding the relationship between working capital and profitability of the
case using Profit before Tax (PBT) as a measure of profitability and the most common measures of working

▪ Efficacy through Working Capital Management
capital. Results of the tests cannot be generalized to the firms in Poultry industry nor on the company as the
study is pertaining to a single unit and also based on the information for 12 years.
V. RESEARCH METHODOLOGY
The data used in the study is obtained from the published results of the company during 2001-2012. The
conceptual framework of working capital and statistical methods are gathered from reference books, publica-
tions of reputed journals and industry websites. The study has been conducted through simple statistical meth-
ods such as correlation, regression and Chi-square test. PBT as a measure of profitability has been compared
with various measures of working capital to understand the association between the variables. An estimation of
the working capital requirements of the company on the basis of linear regression model has been made. The
linear regression model is Y=a+bX. Where Y=working capital. X=Sales. a=the intercept of line on the Y-axis.
I.e., the Amount of working capital required when sales are Nil. b = the rate of growth in working capital. The
difference between working capital during different years has been found and the variation has been tested
with the help of the most popular chi-square test at 5% level of significance.
VI. VENKY’S (INDIA) LIMITED (COMPANY PROFILE)

The VH group was established in 1971, when motivated by his wife Late Smt. Uttaradevi Rao, the found-
er Chairman Late Padmashree Dr. B.V.Rao, fondly referred to as “The Father of the Indian Poultry Industry”,
established Venkateshwara Hatcheries Pvt. Ltd. in Pune (India). Today the group is popularly known the world
over as “Venky’s”. With a unique combination of expertise and experience and supported by strategic collabo-
rations, the company diversified its activities to include SPF eggs, chicken and eggs processing, broiler and
layer breeding, genetic research and Poultry diseases diagnostic, Poultry vaccines and feed supplements, vac-
cine production, bio-security products, Poultry feed & equipments, nutritional health products, soya bean ex-
tract and many more. Today the group is the largest fully integrated poultry group in Asia. The VH group to-
day plays proud parent to a number of reputed organizations under its wide umbrella and successfully caters to
poultry and its allied sectors. The pioneering efforts of the VH Group have been well rewarded with several
national and international awards. By keeping Quality and Technology as their guiding stars, VENKY’S has
consistently fulfilled its commitment to QUALITY THROUGH TECHNOLOGY by ensuring that it not only
manufactures products using high-end technology but also delivers actual value to its customers through its
products and services.
Over the years, Venky’s (India) Limited embarked upon new ventures in regular succession, adding tre-
mendous value to the company, giving it an edge in technology and high returns on investment. The company
has steadily grown to over 30 units spread across India.Today, Venky’s impressive portfolio includes animal
health products, pellet feeds, processed, and further processed chicken products, solvent oil extraction, and
SPF Eggs. The company’s Specific Pathogen Free Egg unit (in technical collaboration with SPAFAS Inc.
USA) is among four such units in the world and the only one of its kind in the developing world.Diversifying
from mainstream poultry products, Venky’s (India) Limited has added to its credit, manufacturing facilities for
nutritional health products for humans, and pet food and health care products. The company has steadily grown
to over 30 units spread across India.The Forbes business magazine of USA ranked Venky’s (India) Limited as
67th among the 100 best global small companies in the year 1999-2000.
VII. VENKEY’S INDIA LIMITED WORKING CAPITAL ANALYSIS

In analyzing working capital the components of working capital, sources of working capital, estimation of
working capital, net working capital and the relationship of various components of working capital with profit-
ability play a pivotal role. It is essential to study the effects of investing in current assets on liquidity and prof-
itability. It is also needed to gauge the usage of working capital, the study on efficiency of over all working
capital and working capital elements, liquidity of working capital elements and structure of working capital is
imperative. A modest attempt has been made to exhibit the same aspects through the below analysis.

A) Components of Working Capital:

Table-I shows the component wise analysis of working capital of Venkateshwara hatcheries Group’s
VENKY’S (INDIA) LIMITED. (VIL) from 2000-01 to 2011-12. It is to be noted that inventory (INV) was the
major constituent of the working capital of VIL it was 49 per cent in the year 2000-01 and it has moved to 44
per cent in the year 2011- 12 The second major constituent was sundry debtors (SDB) which was 32 per cent
in the year 2000-01 and it has moved to 14 per cent in the year 2011-12 which reveals the efficiency of receiv-
ables management and effective credit policy of the VIL. The third major constituent of working capital is
deposits/investments. It was 5 per cent in the year 2000-01 and went to 34 per cent in the year 2009-10 and 10
per cent in the 2011-12. The cash balances, advances and others were recorded as 6 per cent , 4 percent and 4
per cent respectively in the year 2000-01. And moved to 28 per cent, 3 per cent and 1 per cent respectively in
the year 2011-12 and the average was 7 per cent, 3 percent and 2 per cent respectively.
Table-I: Components of Gr oss Wor king Capital of VHIL (Rupees in lakhs)

2000- 2001- 2002- 2003- 2004- 2005- 2006- 2007- 2008- 2009- 2010- 2011- Aver-
Patcl
01 02 03 04 05 06 07 08 09 10 11 12 age
3638 4558 4970 5043 5001 5885 6994 8064 7089 8660 12233 16059 7350
INV
(49) (51) (51) (45) (42) (39) (39) (40) (36) (36) (41) (44) (43)
2379 2652 2945 3430 3396 3811 4573 4665 5227 5144 5959 5342 4127
SDB
(32) (29) (30) (31) (29) (26) (26) (23) (26) (21) (20) (14) (26)
420 414 552 706 472 545 807 907 1084 848 1317 10390 1538
CBL
(6) (5) (6) (6) (4) (4) (5) (5) (5) (4) (4) (28) (7)
280 249 368 504 283 327 538 476 593 498 783 1238 54
ADV
(4) (3) (4) (5) (2) (2) (3) (2) (3) (2) (3) (3) (3)
395 718 506 1033 2412 4040 4442 5263 5211 8131 9278 3734 3764
DPS
(5) (8) (5) (9) (20) (27) (25) (26) (26) (34) (31) (10) (19)
OTH 280 414 368 403 283 327 538 573 705 797 19 150 405
(4) (5) (4) (4) (2) (2) (3) (3) (4) (3) (1) (1) (2)
GWC 7392 9005 9709 11119 11847 14935 17892 19947 19919 24079 29589 36913 17695
TA 15476 17076 19035 20068 20904 25639 29488 32217 32534 37431 47594 64108 30161
% CA
48 53 51 55 57 58 61 62 61 64 62 58 57
to TA
Source: Published Annual Reports of the Company.
Note: Abbreviations Inventory – INV, Sundry Debtors – SDB, Cash & Bank Balance – CBL, Advances – ADV,
Deposits – DEP, others – OTH, Gross Working Capital – GWC, Total Assets – TA.

36
Table-II: Sour ces of Wor king Capital of VHIL (Rupees in Lakhs)
Patcl 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12 Average
Gross Working
Capital
7392 9005 9709 11119 11847 14935 17892 19947 19919 24079 29589 36913 17696
Sources of Working Capital

2859 3592 3941 4227 4223 4543 5215 5750 6095 6317 7554 20423 6228
Short term funds
(39) (40) (41) (38) (36) (30) (29) (29) (31) (26) (26) (55) (35)
4533 5413 5768 6892 7624 10392 12677 14197 13824 17762 22035 16490 11467
Long term funds
(61) (60) (59) (62) (64) (70) (71) (71) (69) (74) (74) (45) (65)
Total Long term
funds
12615 11949 13802 14439 15139 19704 22730 25075 25100 29655 38870 41962 22587
% of long term
funds forworking 36 45 42 48 50 53 56 57 55 60 57 39 50
capital financing
Source: Published Annual Reports of the Company.
GJMT, Vol 2, Issue 1, April 2013

B) Sources of Working Capital:

Table-II reveals the sources of working capital of VIL. Here it an attempt to know the long term and short
term financing of the working capital of VIL. It is transparent that 39 per cent of the working capital was fi-
nance through short term finance in the year 2000-01 and moved to 55 per cent in the year 2011-12. Thus there
was an increasing trend in the utilizing of long term capital as a source of finance which indicates the compa-
ny’s policy of investing in current assets and on the other hand it can also be understand of inability of finding
short term sources of finances.
C) Estimation of Working Capital:

An attempt has been made to estimate the requirements of Working capital needs of VIL with the help of
regression analysis and the required working capital has been projected in the table -3 and chi-square test was
conducted for the actual working capital and estimated working capital of VIL. The chi-square table is 19.68
which is very far below the calculated chi-square value of 5114. Thus there is a large fluctuation in the work-
ing capital of VIL.
Table-III: Estimation of Wor king Capital (Rupees in Lakhs)

Estimated Excess of Shortage of
Actual Work- (O-E)2/E
Years Working Capi- Working Working
ing Capital (O) (X)
tal (E) Capital Capital
2000-01 4533 4839 --------- -306 19
2001-02 5413 5981 --------- -568 54
2002-03 5768 6942 --------- -1174 199
2003-04 6892 7266 -------- -374 19
2004-05 7624 8231 -------- -607 45
2005-06 10392 9267 1125 ---------- 137
2006-07 12677 10194 2483 --------- 605
2007-08 14197 13316 881 ---------- 58
2008-09 13824 14628 -------- -804 44
2009-10 17762 18419 -------- -657 23
2010-11 22800 22607 193 2
2011-12 16487 26704 10217 3909
E(X) 5114
Source: Annual Reports of the Company.

D) Analysis of Efficiency of Working Capital Elements:

An attempt is made to analyse the liquidity position, activity position and profitability position of the or-
ganisation with the help of following ratios which are shown in the following Table-IV.
Table-IV: Efficiency of Working Capital Elements.

Working Current
Debtor Creditor Acid
Inventory Current Cash Capital Asset Profitability
turnover turnover Test
Years turnover Ratio Ratio Turnover Turnover turnover
ratio ratio Ratio
Ratio(ITR) (CUR) (CAR) Ratio Ratio Ratio (PTR)
(DTR) (CTR) (AR)
WCTR CATR
2000-01 4.49 9.48 5.1 2.59 1.31 0.29 4.98 2.21 5.47
2001-02 3.91 10.05 4.39 2.51 1.24 0.32 4.92 1.98 6.08
2002-03 4.15 10.21 4.68 2.46 1.2 0.27 5.21 2.12 3.10
2003-04 4.12 9.11 4.38 2.63 1.44 0.41 4.53 1.87 7.09
2004-05 4.39 10.21 4.58 2.81 1.62 0.68 4.55 1.85 7.72
2005-06 4.42 10.07 5.08 3.29 1.99 1.01 3.69 1.74 4.64
2006-07 4.2 9.12 4.99 3.43 2.09 1.01 3.29 1.64 4.35
2007-08 4.55 11.33 5.73 3.47 2.07 1.07 3.72 1.84 7.91
2008-09 5.96 11.01 6.27 3.27 2.1 1.03 4.16 2.12 5.39
2009-10 5.7 13.82 7.12 3.81 2.44 1.42 4 2.05 11.58
2010-11 4.68 14.44 6.83 4.02 2.4 1.4 3.77 1.89 12.52
2011-12 4.48 18.84 3.19 1.81 1.02 0.69 6.11 1.95 5.68
E) Descriptive Analysis:
Table-V: Descr iptive analysis.

Particulars Minimum Maximum Mean Std. Deviation
ITR 3.91 5.96 4.5875 .62075
DTR 9.11 18.84 11.4742 2.87774
CTR 3.19 7.12 5.1950 1.12253
CUR 1.81 4.02 3.0083 .64296
QR 1.02 2.44 1.7433 .49527
CAR .27 1.42 .8000 .41652
WCTR 3.29 6.11 4.4108 .79989
CATR 1.64 2.21 1.9383 .16705
PTR 3.10 12.52 6.7942 2.82226
F) Bi-Variate Coefficient of Correlation Analysis:

To analyse the impact of Working capital efficiency on Profitability, correlation test has been conducted
between Profitability and various components. In the analysis it is vivid that there is a positive correlation ex-

isting between Inventory turnover ratio, Debtor turnover ratio, Creditor turnover, current ratio, quick ratio and
cash ratio to Profitability. which strongly recommends that efficient utislisation of inventory, better manage-
ment of debts and payables, and proper liquidity of the organisation leads for profitability.
Another important finding is that excess investment in Working capital and Current Assets lead to nega-
tive role in profitability because the relationship between Working capital ratio and current asset ratio is nega-
tive.
Table-VI: Coefficient of Corr elation Analysis.

ITR DTR CTR CUR AR CAR WCTR CATR PTR
ITR 1 .289 .697 .474 .592 .618 -.237 .382 .375
DTR 1 -.018 -.105 .001 .374 .402 .105 .400
CTR 1 .902 .879 .743 -.671 .144 .644
CUR 1 .976 .843 -.897 -.291 .607
AR 1 .918 -.874 -.316 .93
CAR 1 -.676 -.350 .641
WCTR 1 .548 -.304
CATR 1 -.204
PTR 1
Source: Annual Reports of the Company.
VIII. CONCLUSIONS
The components of working capital, sources of working capital, estimation of working capital, net work-
ing capital and the relationship of various components of working capital with profitability play a pivotal role.
It is being analysed that 50 per cent of the long term funds are used in financing working capital, and efficien-
cy of the components of working capital has positive relationship with profitability. Thus effective and effi-
cient management of current assets is the need of the hour.
REFERENCES
[1] Dr. T. Satyanarayana Chary, R. Kasturi & Dr. K. Sampath Kumar Relationship between Working Capital and Profit-
ability - A Statistical Approach, IJRFM Volume 1, Issue 7 (November, 2011) (ISSN 2231-5985).
[2] Shin HH, Soenen L, 1998. Efficiency of Working Capital Management and Corporate Profitability. Financial Prac-
tice and Education,8: 37-45.
[3] Ghosh SK, Maji SG, 2003. Working Capital Management Efficiency: A Study on the Indian Cement Industry. The
Institute of Cost and Works Accountants of India. [http://www.icwai.org/icwai/knowledgebank/fm47.pdf]
[4] Eljelly A, 2004. Liquidity-Profitability Tradeoff: An Empirical Investigation in an Emerging Market. International
Journal of Commerce and Management, 14: 48-61.
[5] Falope OI, Ajilore OT, 2009. Working Capital Management and Corporate Profitability: evidence from panel data
analysis of selected quoted companies in Nigeria. Research Journal of Business Management, 3: 73-84.
[6] Mathuva D, 2009. The Influence of Working Capital Management Components on Corporate Profitability: A Survey
on Kenyan Listed Firms. Research Journal of Business Management, 3: 1-11.
[7] Abdul Rahman, R., & Mohamed Ali, F. H. (2006). Board, Audit Committee, Culture and Earnings Management:
Malaysian evidence. Managerial Auditing Journal, 21(7), 783-804.
[8] Anand, M., & Gupta, C. P. (2001). Working Capital Performance of Corporate India: an Empirical Survey for the
year 2000-2001. Management and Accounting Research, 4(4), 35-65.
[9] Reason, T. (2008). Preparing your company for recession. Retrieved August 2, 2008 fromhttp://
ezproxy.lincoln.ac.nz/login?url=http://proquest.umi.com/pqdweb?did=1423329
071&Fmt=7&clientId=18963&RQT=309&VName=PQD

[10] Richards, V. D., & Laughlin, E. J. (1980). A cash conversion cycle approach to liquidity analysis. Financial Manage-
ment, 9(1), 32-38.
[11] Sartoris, W. L., Hill, N. C., & Kallberg, J. G. (1983). A Generalized Cash Flow Approach to Short-Term Financial
Decisions/Discussion. The Journal of Finance, 38(2), 349-360.

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GJMT Journal

Global Journal of Management & Technology

Volume 2 ▪ Issue 1 ▪ April 2013

Association of Scholars and Professionals

Published and Designed by

GJMT Journal is being published on behalf of Association of Scholars and Professionals.

© 2013 Association of Scholars and Professionals.

Employee Psychology Vis-a -Vis Flexible Work Arrangements in IT Sector

Performance of Indian Manufacturing Sector

Private Equity in India - An Overview

Inclusive Growth in India - A Mirror Image

Efficacy through Working Capital Management - (A Study of Venky’s India Limited)

Instructions for Authors

Role of Venture Capital in Promotion of

1. To discuss the concept of Biotechnology with a comparison to information technology.

II. INFORMATION TECHNOLOGY VERSUS BIOTECHNOLOGY

Table-I: Infor mation Technology Ver sus Biotechnology

2 GJMT, Vol 2, Issue 1, April 2013

III. BIOTECHNOLOGY VALUE CHAIN

Value Chain of the Biotechnology

Basic Verification Prototype Clinical Mar-

DISCOVERY DEVELOPMENT COMMERCIALISATION

Feasibility IP generation Regulatory Phase II Standardization Distribution

Concepts Registration Validation Sales & service

Source: Jone and Hine (2004).

IV. IMPACT OF BIOTECHNOLOGY ON ECONOMY

GJMT, Vol 2, Issue 1, April 2013 3

4 GJMT, Vol 2, Issue 1, April 2013

V. GLOBAL BIOTECH INDUSTRY - AN OVERVIEW

GJMT, Vol 2, Issue 1, April 2013 5

VI. MANAGING FINANCES

6 GJMT, Vol 2, Issue 1, April 2013

VII. BIOTECHNOLOGY IN INDIA

Table -II: Biotech Industr y in 2004-05

Revenues (in Rs.Crore) Market Share (%)

BioPharma 2752 3570 79.19 75.24 29.72

BioServices 275 425 7.91 8.96 54.55

BioAgri 130 330 3.74 6.95 153.85

Bioindustrial 238 320 6.85 6.74 34.45

Bioinformatics 80 100 2.30 2.11 25.00

Total Industry Size 3475 4745 100.00 100.00 36.55

GJMT, Vol 2, Issue 1, April 2013 7

VIII. INVESTMENTS IN INDIAN BIOTECHNOLOGY

8 GJMT, Vol 2, Issue 1, April 2013

GJMT, Vol 2, Issue 1, April 2013 9

IX. INDIAN VC FINANCIAL SUPPORT FOR BIOTECHNOLOGY - PROBLEMS AND PROSPECTS

10 GJMT, Vol 2, Issue 1, April 2013

7. 125% tax deduction on R&D expenditure.

8. Three-year excise duty waiver on patented products.

GJMT, Vol 2, Issue 1, April 2013 11

Exhibit - II: SWOT Analysis

Trained manpower and knowledge base, Good network of research laboratories,

Missing link between research and commercialization, Lack of Venture Capital,

THREATS Danger of anti-biotech propaganda gaining ground and IPR policies.

Source: Investor Intelligence – July-August 2002.

12 GJMT, Vol 2, Issue 1, April 2013

Employee Psychology Vis-a -Vis Flexible Work Arrangements

Keywords: FWA, IT sector, Employee, Employer, work flexibility, psychological.

II. FOCUS ON FEW MAJOR ASPECTS

14 GJMT, Vol 2, Issue 1, April 2013

III. BENEFITS TO THE ORGANIZATION

GJMT, Vol 2, Issue 1, April 2013 15

16 GJMT, Vol 2, Issue 1, April 2013