A STUDY ON

WORKING CAPITAL MANAGEMENT

With reference to BHARAT SANCHAR NIGAM LTD., Visakhapatnam A project Report Submitted to Jawaharlal Nehru Technological University, Kakinada In Partial fulfillment for the Award of the Degree of MASTER OF BUSINESS ADMINISTRATION Submitted By Mr. V.SARUMUDI (09811E0050) Under the Guidance of Ms. A.D. LALITHA (Assistant Professor of Management Studies)

DEPARTMENT OF MANAGEMENT STUDIES AVANTHI INSTITUTE OF ENGINEERING AND TECHNOLOGY (Approved by AICTE, Recognized by the Govt. of A.P. & Affiliated to JNT University, Kakinada) (2009-2011) Narsipatnam, Visakhapatnam. (An NBA Accredited Institution)

DECLARATION
I hereby declare that this project report entitled A STUDY ON WORKING CAPITAL MANAGEMENT FIRMBSNL, VISAKHAPATNAM has been prepared by me impartial fulfillment of requirement for the award of Degree of Master of Business Administration by JNTU, KAKINADA.

I also hereby declare that this project is the result of my own effort and that it has not been submitted to any other university for the award of any degree or diploma.

Place: Visakhapatnam Date:

V.SARUMUDI (Regd No: 09811E0050)

CERTIFICATE
This is to certify that the project title A STUDY ON WORKING CAPITAL MANAGEMENT with reference to BSNL, Visakhapatnam, in partial fulfillment for the award of MASTER OF BUSINESS

ADMINISTRATION has been carried out by him under my guidance, and the project report has not been submitted to any other university or institution any time before.

Dr. C.P.V.N.J. MOHAN RAO Head of the department

A. DHANA LALITHA (Project Guide)

ACKNOWLEDGEMENT
I take the responsibility to acknowledgement the following distinguished personalities who graciously allowed me to carry out this project work successfully.

I express my profound regards to Dr. C.P.V.N.J. MOHANARAO, M.Tech, Ph.D, head of the department, principal of the college and my project guide Ms. A.D. LALITHA, Assistant Professor, without whose guidance and

encouragement this project would not have been completed. He is constant source of inspiration throughout the project.

I thankful to Mr.J.Nagaraju, who gave me opportunity to do project work.

Finally I would like to thank my family and my friends who assisted in completing the project work.

V.SARUMUDI (Regd No: 09811E0050)

CONTENTS
CHAPTER I
 INTRODUCTION  NEED FOR THE STUDY  OBJECTIVES OF THE STUDT  METHEDOLOGY OF THE STUDY  LIMITATIONS OF THE STUDY

CHAPTER II
 INDUSTRIAL ANALYSIS

CHAPTER III
 COMPANY ANALYSIS

CHAPTER IV
 THEORITICAL FRAMEWORK OF WORKING CAPITAL MANAGEMENT

CHAPTER V
 ANALYSIS &INTERPRETATION

CHAPTER VI
    SUMMARY FINDINGS & SUGGESTIONS CONCLUSION BIBLIOGRAPHY

INTRODUCTION
Finance is one of the basic foundations of all kinds of economic activities. Financial management is one integral part of overall management; it is not a totally independent area it is concerned with the acquisition, financing and management of assets with some overall goal in mind. Financial management is important because it has an impact o all the activities of financial management. The basic objective of financial management is to maintain the liquid assets and maximization of the profitability of the firm. Efficient management of every businesses enterprise is closely linked with efficient management of the finance. Maintenance of liquid assets means that the firm has adequate cash in hand to meet its obligations at all times. A business firm is a profit seeking organization profit maximization is also well consideration to be an important objective of financial management.

Financial management is mainly concerned with the proper management of finance function. Risk: cost and control considerations are properly balanced in a given situation and there is optimum utilization of funds. Financial management emerged as a distinct field of study at the turn of 20th century.

Financial management as an integral part of overall management is not totally independent area. It draws heavily on related disciplines and field of study. Such as economics, accounting, marketing, production and quantitative methods. It helps in profit planning, capital spending, measuring costs. Controlling inventories, accounts receivable, etc. it is essentially helps in optimizing the financial from a given input of funds.

A study of financial management with particular reference to the working capital management in the large public sector under taking is a challenging task and endeavor in this direction is to analyze the working capital balances management, receivables and inventory management. Working capital is the amount required to meet day-to-day operation at the organization. An absence of this makes the functioning of the organization blind. A proper study on working capital management results in prevention of mismanagement and misutilisation of funds.

Funds are required for two basic reasons in any organization. First, funds are needed for the creation of productive, capacities and purchase fixed assets. Secondary, to finance a past for the day-to-day running of business which in other words is the working capital.

Working capital management takes care of the problem that arises during the management of current assets, his current liabilities and interrelationship that exist between them. Thus it is also known as current asset management and current liabilities from an integral part in the balance sheet of the firm.

Working capital is an integral of overall corporate management, the finance corporate management the finance manager has to carry out the finance function is the face of risk cannot be predicated with certainty.

NEED FOR THE STUDY

 To know the financial position of telecommunication in India.  To know more information about study topic.  To have a personal exposure by visiting the organization for many times.  To develop the communication skills by preparing the project.

 To know the importance of financial statements analysis in the organization.

 To know the working capital place in the financial management of large scale telecommunications BSNL, MTNL.

OBJECTIVES OF THE STUDY

 To the find financial position of the BSNL in the telecommunication industry.

 To focus on the working capital management of the BSNL and find out the effective utilization of working capital.

 To find out the performance of working capital finance in BSNL.  To compare the working capital for the past 2 years and find out the causes for increase or decrease in working capital.

 To provide the suggestions it any.

METHODOLOGY OF THE STUDY

Primary data:
Primary data is collected from the office staff and employees in the company through a structured schedules and personal interview. It includes and personal interview. It includes the personnel interview. It includes first hand information from within the company. The schedule is especially designed to find out various commissions and other benefits packages to motivate and retain the employees within the company.

Secondary data:
Secondary sources include the information from the management of the company, annual reports of the company, various books, journals and the internet websites.

1. Data collected from selected outlets.

2. Information collected from periodicals and journals.

LIMITATIONS OF THE STUDY

The limitations that came across during the course of this work are listed as below:
 Observing financial performance of BSNL as whole telecommunication industry cannot be judged.

 Limited time given to study about their aspects.  The duration of 45 days allotted for this work is insufficient to collect data comprehensively for this study.

 For the accounting year 2010-2011 the accounts have not been finalized due to this information relating to this period is not gathered.

CHAPTER-2
INDUSTRY ANALYSIS

Telecommunications in India
The Indian telecommunications industry is the world's fastest growing telecommunications industry, with 742.12 Million telephone (landlines and mobile) subscribers and 706.69 Million mobile phone connections as of Oct 31st 2010.It is also the second largest telecommunication network in the world in terms of number of wireless connections after China. The Indian Mobile subscriber base has increased in size by a factor of more than one hundred since 2001 when the number of subscribers in the country was approximately 5 million to 706.69 Million by Oct 2010. As the fastest growing telecommunications industry in the world, it is projected that India will have 1.159 billion mobile subscribers by 2013. Furthermore, projections by several leading global consultancies indicate that the total number of subscribers in India will exceed the total subscriber count in the China by 2013. The industry is expected to reach a size of 344,921 crore(US$74.85 billion) by 2012 at a growth rate of over 26 per cent, and generate employment opportunities for about 10 million people during the same period. According to analysts, the sector would create direct employment for 2.8 million people and for 7 million indirectly. In 2008-09 the overall telecom equipments revenue in India stood at 136,833 crore (US$29.69 billion) during the fiscal, as against 115,382 crore (US$25.04 billion) a year before.

Modern growth:
A large population, low telephony penetration levels, and a rise in consumers' income and spending owing to strong economic growth have helped make India the fastest-growing telecom market in the world. The first operator is the state-owned incumbent BSNL. BSNL was created by corporatization of the erstwhile Indian Telecommunication Service, a government unit responsible for provision of telephony services. Subsequently, after the telecommunication policies were revised to allow private operators, companies such as Vodafone, Bharti Airtel, Tata Indicom, Idea Cellular, Aircel and Loop Mobile have entered the space. See mobile operators in India. In 2008-09, rural India outpaced urban India in mobile growth rate. Bharti Airtel now is the largest telecom company in India. India's mobile phone market is the fastest growing in the world, with companies adding some 18.98 million new customers in Oct 2010. The total number of telephones in the country crossed the 742.12 million mark in Oct 31st, 2010. The overall tele-density has increased to 62.31% by Oct 31st 2010. In the wireless segment, 18.98 million subscribers were added in Oct 2010. The total wireless subscribers (GSM, CDMA & WLL (F)) base is more than 706 million now. The wireline segment subscriber base stood at 35.43 million with a decline of 0.14 million as of Oct 31st 2010.

HISTORY:
Telecom in the real sense means transfer of information between two distant points in space. The popular meaning of telecom always involves electrical signals and nowadays people exclude postal or any other raw telecommunication methods from its meaning. Therefore, the history of Indian telecom can be started with the introduction of telegraph.

INTRODUCTION OF TELEGRAPH:
The postal and telecom sectors had a slow and uneasy start in India. In 1850, the first experimental electric telegraph Line was started between Kolkata and Diamond Harbor. In 1851, it was opened for the British East India Company. The Posts and Telegraphs department occupied a small corner of the Public Works Department, at that time. Construction of 4,000 miles (6,400 km) of telegraph lines connecting Kolkata (Calcutta) and Peshawar in the north along with Agra, Mumbai (Bombay) through Sandra Ghats, and Chennai in the south, as well as Ootacamund and Bangalore was started in November 1853. Dr. William O'Shaughnessy, who pioneered telegraph and telephone in India, belonged to the Public Works Department. He worked towards the development of telecom throughout this period. A separate department was opened in 1854 when telegraph facilities were opened to the public.

INTRODUCTION OF THE TELEPHONE:

In 1880, two telephone companies namely The Oriental Telephone Company Ltd. and The Anglo-Indian Telephone Company Ltd. approached the Government of India to establish telephone exchanges in India. The permission was refused on the grounds that the establishment of telephones was a Government monopoly and that the Government itself would undertake the work. In 1881, the Government later reversed its earlier decision and a license was granted to the Oriental Telephone Company Limited of England for opening telephone exchanges at Calcutta, Bombay, Madras and Ahmadabad and the first formal telephone service was established in the country. 28 January 1882, is a Red Letter Day in the history of telephone in India. On this day Major E. Baring, Member of the Governor General of India's Council declared open the Telephone Exchanges in Calcutta, Bombay and Madras. The exchange in Calcutta named "Central Exchange" was opened at third floor of the building at 7, Council House Street.

FURTHER DEVELOPMENTS
A Mobile Phone Tower:
y

1902 - First wireless telegraph station established between Sagar Islands and Sandheads.

y y y

1907 - First Central Battery of telephones introduced in Kanpur. 1913-1914 - First Automatic Exchange installed in Shimla. 23 July 1927 - Radio-telegraph system between the UK and India, with Imperial Wireless Chain beam stations at Khadki and Daund, inaugurated by Lord Irwin by exchanging greetings with King George V.

y y y

1933 - Radiotelephone system inaugurated between the UK and India. 1953 - 12 channel carrier system introduced. 1960 - First subscriber trunk dialing route commissioned between Lucknow and Kanpur.

1975 - First PCM system commissioned between Mumbai City and Andheri telephone exchanges.

y y y

1976 - First digital microwave junction introduced. 1979 - First optical fibre system for local junction commissioned at Pune. 1980 - First satellite earth station for domestic communications established at Secunderabad, A.P..

1983 - First analog Stored Program Control exchange for trunk lines commissioned at Mumbai.

1984 - C-DOT established for indigenous development and production of digital exchanges.

1985 - First mobile telephone service started on non-commercial basis in Delhi.

While all the major cities and towns in the country were linked with telephones during the British period, the total number of telephones in 1948 was only around 80,000. Even after independence, growth was extremely slow. The telephone was a status symbol rather than being an instrument of utility. The number of telephones grew leisurely to 980,000 in 1971, 2.15 million in 1981 and 5.07 million in 1991, the year economic reforms were initiated in the country. While certain innovative steps were taken from time to time, as for example introduction of the telex service in Mumbai in 1953 and commissioning of the first [subscriber trunk dialing] route between Delhi and Kanpur and between Lucknow and Kanpur in 1960, the first waves of change were set going by Sam Pitroda in the eighties. He brought in a whiff of fresh air. The real transformation in scenario came with the announcement of the National Telecom Policy in 1994.

Emergence as a major player:

In 1975, the Department of Telecom (DoT) was separated from Indian Post & Telecommunication Accounts and Finance Service. DoT was responsible for telecom services in entire country until 1985 when Mahanagar Telephone Nigam Limited (MTNL) was carved out of DoT to run the telecom services of Delhi and Mumbai. In 1990s the telecom sector was opened up by the Government for private investment as a part of Liberalisation-PrivatizationGlobalization policy. Therefore, it became necessary to separate the Government's policy wing from its operations wing. The Government of India corporatised the operations wing of DoT on 1 October 2000 and named it as Bharat Sanchar Nigam Limited (BSNL). Many private operators, such as Reliance Communications, Tata Indicom, Vodafone, Loop Mobile, Airtel, Idea etc., successfully entered the high potential Indian telecom market

Telecommunications Regulatory Environment in India:

LIRNEasia's Telecommunications Regulatory Environment (TRE) index, which summarizes stakeholders perception on certain TRE dimensions, provides insight into how conducive the environment is for further development and progress. The most recent survey was conducted in July 2008 in eight Asian countries, including Bangladesh, India, Indonesia, Sri Lanka, Maldives, Pakistan, Thailand, and the Philippines. The tool measured seven dimensions: i) market entry; ii) access to scarce resources; iii) interconnection; iv) tariff regulation; v) anti-competitive practices; and vi) universal services; vii) quality of service, for the fixed, mobile and broadband sectors.

The results for India, point out to the fact that the stakeholders perceive the TRE to be most conducive for the mobile sector followed by fixed and then broadband. Other than for Access to Scarce Resources the fixed sector lags behind the mobile sector. The fixed and mobile sectors have the highest scores for Tariff Regulation. Market entry also scores well for the mobile sector as competition is well entrenched with most of the circles with 4-5 mobile service providers. The broadband sector has the lowest score in the aggregate. The low penetration of broadband of mere 3.87 against the policy objective of 9 million at the end of 2007 clearly indicates that the regulatory environment is not very conducive.

Revenue and growth:

The total revenue in the telecom service sector was 86,720 crore (US$18.8 billion) in 2005-06 as against 71,674 crore (US$15.6 billion) in 2004-2005, registering a growth of 21%. The total investment in the telecom services sector reached 200,660 crore (US$43.5 billion) in 2005-06, up from 178,831 crore (US$38.8 billion) in the previous fiscal. Telecommunication is the lifeline of the rapidly growing Information Technology industry. Internet subscriber base has risen to 100 million in 2010. Out of this 10.52 million were broadband connections. More than a billion people use the internet globally. Under the Bharat Nirman Programme, the Government of India will ensure that 66,822 revenue villages in the country, which have not yet been provided with a Village Public Telephone (VPT), will be connected. However doubts have been raised about what it would mean for the poor in the country. It is difficult to ascertain fully the employment potential of the telecom sector but the enormity of the opportunities can be gauged from the fact that there were 3.7 million Public Call Offices in December 2005 up from 2.3 million in December 2004. The value added services (VAS) market within the mobile industry in India has the potential to grow from US$500 million in 2006 to a whopping US$10 billion by 2009.

Telephone:
On landlines, intra-circle calls are considered local calls while inter-circle are considered long distance calls. Currently Government is working to integrate the whole country in one telecom circle. For long distance calls, the area code prefixed with a zero is dialed first which is then followed by the number (i.e. to call Delhi, 011 would be dialed first followed by the phone number). For international calls, "00" must be dialed first followed by the country code, area code and local phone number. The country code for India is 91. Telephone Subscribers (Wireless and Landline): 742.12 million (Oct 2010) Land Lines Cell phones Yearly Cell phone Addition 10) Monthly Cell phone Addition Teledensity Projected Teledensity (2012) : 18.98 million (Oct 2010) : 62.51 % (Oct 2010) : 1 billion, 84% of population : 35.43 million (Oct 2010) : 706.69 million (Oct 2010) : 218.29 million (Oct 2009-

India is divided into 23 telecom circles. They are listed below:

y y y y y y y y y y y y y y y y

Assam Andhra Pradesh Bihar & Jharkhand Chennai Delhi & NCR Gujarat & Daman & Diu Haryana Himachal Pradesh Jammu and Kashmir Karnataka Kerala & Lakshadweep Kolkata Madhya Pradesh & Chhattisgarh Maharashtra (excluding Mumbai) & Goa Mumbai North Eastern States (Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, & Tripura)

y y y y y y y

Orissa Punjab Rajasthan Tamil Nadu excluding Chennai & Puducherry Eastern Uttar Pradesh Western Uttar Pradesh & Uttarakhand West Bengal (excluding Kolkata), Andaman & Nicobar Islands & Sikkim

The following table gives details regarding the subscriber base of each Mobile Service Provider in India as of 31 Oct 2010: Operator
Bharti Airtel

Subscriber base Market Share

146,293,078 21.34% 17.37% 17.08% 11.31% 11.47% 10.84% 6.64% 1.05% 0.45% 0.86% 0.81% 0.43% 0.22% 0.005% 0.13% 100%

Reliance Communications 119,351,438 Vodafone BSNL Tata Teleservices Idea Aircel Unitech Loop Sistema MTNL Videocon Stel Etisalat HFCL Infotel All India 118,038,438 80,739,935 80,817,298 76,023,551 47,519,629 13,748,300 3,009,445 7,121,765 5,342,039 5,616,152 1,867,060 70,829 1,132,477 706,691,164

A list of ten states (including the metros Mumbai, Kolkata and Chennai in their respective states) with the largest subscriber base as of Oct 31st 2010 is given below: Operator
Vodafone Videocon Unitech Tata Teleservices Stel Sistema

Subscriber base Market Share

118,038,438 5,616,152 13,748,300 80,817,298 1,867,060 7,121,765 17.08% 0.43% 1.05% 11.47% 0.22% 0.86% 17.37% 0.81% 0.45% 10.84% 0.13% 0.005% 11.31% 21.34% 100% 6.64%

Reliance Communications 119,351,438 MTNL Loop Idea HFCL Infotel Etisalat BSNL Bharti Airtel All India Aircel 5,342,039 3,009,445 76,023,551 1,132,477 70,829 80,739,935 146,293,078 706,691,164 47,519,629

State Uttar Pradesh Maharashtra Tamil Nadu Andhra Pradesh West Bengal Bihar Karnataka Gujarat Rajasthan Madhya Pradesh India

Subscriber base 92,867,835 84,543,727 63,671,528 54,000,379 51,901,967 46,311,291 43,802,688 40,158,662 38,649,784 38,295,896 706,691,164

Population (01/08/2010) 199,415,992 110,351,688 67,773,611 84,241,069 90,524,849 97,560,027 58,969,294 58,388,625 67,449,102 72,362,313 1,188,783,351

Mobile phones per 1000 population 427 707 881 600 520 430 709 618 535 489 580

a list of ten states (including the metros Mumbai, Kolkata and Chennai in their respective states) with the largest subscriber base as of oct 31st 2010 is given below: Subscriber base
54,000,379 46,311,291 40,158,662 706,691,164 43,802,688 38,295,896 84,543,727 38,649,784 63,671,528 92,867,835 51,901,967

State
Andhra Pradesh Bihar Gujarat India Karnataka Madhya Pradesh Maharashtra Rajasthan Tamil Nadu Uttar Pradesh West Bengal

Population (01/08/2010)
84,241,069 97,560,027 58,388,625 1,188,783,351 58,969,294 72,362,313 110,351,688 67,449,102 67,773,611 199,415,992 90,524,849

Mobile phones per 1000 population

600 430 618 580 709 489 707 535 881 427 520

LANDLINES:
Until recently, only the Government-owned BSNL and MTNL were allowed to provide landline phone services through copper wire in India with MTNL operating in Delhi and Mumbai and BSNL servicing all other areas of the country. Private operators such as Touchtel and Tata Teleservices have entered the market however; the primary focus of their business is on the mobile-phone sector. Due to the rapid growth of the cellular phone industry in India, landlines are facing stiff competition from cellular operators. This has forced landline service providers to become more efficient and improve their quality of service. Landline connections are now also available on demand, even in high density urban areas. The breakup of wireline subscriber base in India as of September 2009 is given below:

Operator
BSNL MTNL Bharti Airtel Reliance Communications Tata Teleservices HFCL Infotel Teleservices Ltd All India

Subscriber base
28,446,969 3,514,454 2,928,254 1,152,237 1,003,261 165,978 95,181 37,306,334

The list of eight states (including the metros Mumbai, Kolkata and Chennai in their respective states) with largest subscriber base as of September 2009 is given below: State
Andhra Pradesh Delhi Karnataka Kerala Maharashtra Tamil Nadu Uttar Pradesh West Bengal

Subscriber base
2,477,755 2,632,225 2,751,296 3,534,211 5,996,912 3,620,729 2,803,049 2,490,253

Internet:
India has the world's third largest subscriber base of internet users with 100 million users (of whom 40 million use the internet via mobile phones) as of Dec 2010. Internet penetration in India is one of the lowest in the world which is 8.4% of the population, compared to other nations like United States, Japan or South Korea where internet penetration is significantly higher than in India. The number of broadband connections in India has seen a continuous growth since the beginning of 2006. At the end of Oct 2010, total broadband connections in the country have reached 10.52 million.

Broadband in India is more expensive as compared to Western Europe/United Kingdom and United States. After economic liberalization in 1992, many private ISPs have entered the market, many with their own local loop and gateway infrastructures. The telecom services market is regulated by the TRAI and the DoT, which has been known to impose censorship on some websites.

Low Speed Broadband (256 kbit/s - 2 mbit/s):

The current definition of Broadband in India is speeds of 256 kbit/s. TRAI on July 2009 has recommended raising this limit to 2 Mbit/s. As of October 2010, India has 10.52 million broadband users, constituting 6.0% of the population.[4] India ranks one of the lowest provider of broadband speed as compared countries such as Japan, South Korea and France. Because of the increase in Broadband penetration and the quality of service steadily improving, many non-resident Indians are now enjoying the ability to communicate with family in India from around the world. However, many consumers complain that ISPs still fail to provide the advertised speeds some even failing to meet the 256 kbit/s standards.

High Speed Broadband (over 2 Mbit/s):

y

Airtel has launched plans up to 16 Mbit/s on ADSL2+ enabled lines and is piloting new 30 Mbit/s and 50 Mbit/s plans in limited areas.

Beam Telecom offers plans up to 6 Mbit/s for home users and has 20 Mbit/s plans available for power users in only Hyderabad city.

BSNL offers ADSL up to 8 Mbit/s in many cities.It also started offering FTTH speeds ranging from 256Kbps to 100Mbps.

Hayai Broadband will offer FTTH services up to 100 Mbit/s, with an Internal network speed of 1 Gbit/s.

y y

Honesty Net Solutions offers Broadband over Cable at up to 4 Mbit/s. MTNL offers VDSL at speeds up to 20 Mbit/s in selected areas, also provides bandwidth at speeds of 155 Mbit/s.

Reliance Communications offers 10 Mbit/s and 20 Mbit/s broadband internet services in selected areas.

Tata Indicom offers 10 Mbit/s, 20 Mbit/s and 100 Mbit/s options under the "Lightning Plus" tariffs structure.

Tikona Digital Networks Wireless Broadband service which is powered by OFDM and MIMO 4th Generation (4G) technologies with 2 Mbit/s.

O-Zone Networks Private Limited Pan-India public Wi-Fi hotspot provider giving wireless broadband up to 2 Mb/s.

Next generation networks:

In the Next Generation Networks, multiple access networks can connect customers to a core network based on IP technology. These access networks include fiber optics or coaxial cable networks connected to fixed locations or customers connected through Wi-Fi as well as to 3G networks connected to mobile users. As a result, in the future, it would be impossible to identify whether the next generation network is a fixed or mobile network and the wireless access broadband would be used both for fixed and mobile services. It would then be futile to differentiate between fixed and mobile networks both fixed and mobile users will access services through a single core network. Indian telecom networks are not so intensive as developed countrys telecom networks and India's teledensity is low only in rural areas. 670,000 route kilometers (419,000 miles) of optical fibres has been laid in India by the major operators, even in remote areas and the process continues. BSNL alone has laid optical fibre to 30,000 Telephone Exchanges out of their 36 Exchanges. Keeping in mind the viability of providing services in rural areas, an attractive solution appears to be one which offers multiple service facility at low costs. A rural network based on the extensive optical fibre network, using Internet Protocol and offering a variety of services and the availability of open platforms for service development, viz. the Next Generation Network, appears to be an attractive proposition. Fibre network can be easily converted to Next Generation network and then used for delivering multiple services at cheap cost.

Mobile Number Portability (MNP):

TRAI announced the rules and regulations to be followed for the Mobile Number Portability in their draft release on 23 September 2009. Mobile Number Portability (MNP) allows users to retain their numbers, while shifting to a different service provider provided they follow the guidelines set by TRAI. Once a customer changes his/her service provider & retaining the same mobile number they are expected to hold Thiele number with a given provider for at least 90 days, before they decide to move to another service provider. This restriction is set in place to keep a check on exploitation of MNP services provided by the service providers. As per news reports, Government of India decided to implement MNP from December 31, 2009 in Metros & category A service areas and by March 20, 2010 in rest of the country. It has been postponed to March 31, 2010 in Metros & category 'A' service areas. However, time and time again, lobbying by the state-run firms, BSNL and MTNL has resulted in innumerable delays in the implementation of Mobile Number portability. The latest reports suggest BSNL and MTNL are finally ready to implement the Mobile Number Portability by October 31, 2010. A press release by the Department of Telecommunications on 30 June 2010 said "Keeping the complexity and enormity of the testing involved before MNP is implemented and keeping in view the present status of implementation by various operators, it has now been decided to extend the time line for implementation of MNP to 31st October 2010."

The latest official report is that Mobile Number Portability will be phased in slowly, starting with Haryana which will have MNP on or soon after November 1, 2010. A news report on 25 November 2010 said Mobile Number Portability (MNP) was finally launched in Haryana. The MNP service inaugurate by the Union Minister of Communications & IT Mr. Kapil Sibal by making the inaugural call to Shri Bhupindrer Singh Hooda, the Chief Minister of Haryana from a ported mobile number in function held at Rohtak city.

International:
y

Nine satellite earth stations - 8 Intelsat (Indian Ocean) and 1 Inmarsat (Indian Ocean region).

Nine gateway exchanges operating from Mumbai, New Delhi, Kolkata, Chennai, Jalandhar, Kanpur, Gandhinagar, Hyderabad and Ernakulam.

Submarine cables:
y y y y

LOCOM linking Chennai to Penang, Malaysia. India-UAEcable linking Mumbai to Al Fujayrah, UAE. SEA-ME-WE 2 (South East Asia-Middle East-Western Europe 2) SEA-ME-WE 3 (South East Asia-Middle East-Western Europe 3) Landing sites at Cochin and Mumbai. Capacity of 960 Gbit/s.

SEA-ME-WE 4 (South East Asia-Middle East-Western Europe 4) Landing sites at Mumbai and Chennai. Capacity of 1.28 Tbit/s.

TIISCS (Tata Indicom India-Singapore Cable System), also known as TIC (Tata Indicom Cable), Chennai to Singapore. Capacity of 5.12 Tbit/s.

y y

i2i - Chennai to Singapore. Capacity of 8.4 Tbit/s. SEACOM from Mumbai to the Mediterranean, via South Africa. It currently joins with SEA-ME-WE 4 off the west coast of Spain to carry traffic onward to London (2009). Capacity of 1.28 Tbit/s.

I-ME-WE (India-Middle East-Western Europe) with two landing sites at Mumbai (2009). Capacity of 3.84 Tbit/s.

y y y

EIG (Europe-India Gateway), landing at Mumbai (due Q2 2010). MENA (Middle East North Africa). TGN-Eurasia (Announced) Landing at Mumbai (due 2010?), Capacity of 1.28 Tbit/s

TGN-Gulf (Announced) Landing at Mumbai (due 2011?), Capacity Unknown.

Telecom Training in India:

The incumbent telecom operators (BSNL & MTNL) have maintained several telecom training centres at regional, circle and district level. BSNL has three national level institutions, namely Advanced Level Telecom Training Centre (ALTTC) at Ghaziabad, UP; Bharat Ratna Bhim Rao Ambedkar Institute Of Telecom Training at Jabalpur, MP; and National Academy of Telecom Finance and Management. MTNL incorporated Centre for Excellence in Telecom Technology and Management (CETTM) in 2003-04. It is the largest telecom training centre in India and one of the biggest in Asia with a capex plan of over 100 crore (US$21.7 million). CETTM is situated at Hiranandani Gardens, Powai, Mumbai with built area of 486,921 sq ft (45,236.4 m2). It provides training in telecom switching, transmission, wireless communication, telecom operations and management to corporates and students besides its own internal employees. Other than the government opearators some private players like Bharti (Bharti School of Telecom Management part of IIT Delhi), Aegis School of Business and Telecommunication (Banglore and Mumbai) and Reliance have started their own training centres. In addition some independent centres like Telcoma Technologies providing Telecom Training have also evolved in India.

Telecommunications Statistics in India

Introduction:
India has the fastest growing telecom network in the world with its high population and development potential. Airtel , Idea, Reliance, BSNL, Aircel,Tata Indicom, Vodafone, MTNL, and Loop Mobile are other major operators in India. However, rural India still lacks strong infrastructure. India's public sector telecom company BSNL is the 7th largest telecom company in world. Telephony introduced in India in 1882. Today the total number of telephone subscribers in the country crossed the 700 million mark in Sept 2010 and the total numbers of telephone subscribers have reached 723.28 million at the end of Sept 2010. The overall tele-density has increased to 60.99 % in Sept 2010. In the wireless segment, 17.10 million subscribers have been added in Sept 2010. The total wireless (GSM, CDMA & WLL (F)) subscribers base is 687.71 million as of Sept 2010. The wire line segment subscriber base stood at 35.57 million. According to recent reports, India will overtake China to become the world's largest mobile telecommunications market by the year 2013. It is predicted that by then, the teledensity will shoot up to 75% and the total mobile subscriber base would be a staggering 1.159 billion!!

Telephone statistics:
y

Telephony Subscribers (Wireless and Landline): 742.12 million (OCT 2010)

y y y y y y

Land Lines: 35.43 million (OCT 2010) Cell phones: 707.69 million (OCT 2010) Yearly Cell phone Addition: 216.01 million (Oct 2009 - 2010) Monthly Cell phone Addition: 18.98 million (Oct 2010) Teledensity: 62.51 % (Oct 2010) Projected Teledensity: 1.159 billion, 75% of population by 2013. Telephone System: The telecommunications system in India is the 2nd largest in the world. The country is divided into several zones, called circles (roughly along state boundaries). Government and several private operators run local and long distance telephone services. It was thrown open to private operators in the 1990s. Competition has caused prices to drop and calls across India are one of the cheapest in the world. The rates are supposed to go down further with new measures to be taken by the Information Ministry.

Landlines: In India landline service is firstly run by BSNL/MTNL and after there are several other private players too, such as Airtel, Reliance Infocomm, Tata Teleservices and Touchtel. Landlines are facing stiff competition from mobile telephones. The competition has forced the landline services to become more efficient. The landline network quality has improved and landline connections are now usually available on demand, even in high density urban areas.

Mobile Cellular: The mobile service has start growth since 2000. The number of mobile phone connections has crossed fixed-line connections in Sept 2004. Currently there are an estimated 652.42 million mobile phone users in India compared to 35.96 million fixed line subscribers. India primarily follows the GSM mobile system, in the 900 MHz band. Recent operators also operate in the 1800 MHz band. The dominant players are Aircel, Vodafone, Airtel, Tata Indicom, Tata Teleservices, MTS, Uninor, Reliance Infocomm, Idea Cellular and BSNL/MTNL. There are many smaller players, with operations in only a few states. International roaming agreements exist between most operators and many foreign carriers.

Dialing System: On landlines system, intra circle calls are considered local calls while inner circle are considered long distance calls. Government is now working to integrate the whole country in one telecom circle. For long distance calls, you dial the area code prefixed with a zero (e.g. for Delhi, you would dial 011-XXXX XXXX). For international calls, you would dial "00" or + and the country code+area code+number. The country code for India is 91.

Call Rates Cutting Blows: The rates of Communication in India were one of the highest in the world, till a few years back. The rates could not be justified by the fact that rupee is cheaper. In fact the Indian sub continent had shown a calm tolerance towards the high rate in even in telecom. The rates were also justified as the government has to feel the high cost involved in the one-time developments like satellite and telephone tower related charges.

One of the enabling technologies behind this is the brain child of an able Indian engineer Sandipan Bhattacharjee. He co-worked with a famous MNC to redefine the way telephones interact. A computer engineer by profession, he extended wave-overlap theory to reach this goal. The technology is now patented and details are not available. There is a conversion process underway to make all numbers in India 10 digits long.
y

Internet Users: Number of Internet users in India is the 4th largest in the world. Internet population is expected to grow to 100 million users by 2007

Broadband Subscribers: Broadband in India is defined as 256kbit/s and above by the government regulator. Total subscribers were 9.77 million (July 2010) Source: TRAI

Internet Service Providers (ISPs) & Hosts: 86,571 (2004) Source: CIA World Fact Book

Country code (Top-level domain): IN

MOBILE PHONE COMPANIES OF INDIA:

The Mobile phone industry in India is covered in this article. Mobile phones are usually called "mobile phones" or "cell phones" in India. History:
y

The first mobile phone was launched in India during 1990s

Mobile phone service operators:

y

Aircel Aircel, headquarted in New Delhi, India has absorbed Cingular Wireless, and offers 2G service using GSM technology and 3G service using WCDMA technology.

Airtel Airtel, with its head offices in both Mumbai, India provides 2G service using cdmaOne and 3G service using CDMA2000 technology

BSNL BSNL, headquartered in New Delhi, is a public listed company and is state-owned. It offers 2G service using GSM and 3G service using WCDMA. It was the first service provider to introduce 3G services in India.

MTNL MTNL, headquartered in Mumbai is a public listed company and is stateowned and offers 2G service using CDMA and 3G service using GSM.

Idea Cellular Idea Cellular, headquarter in Mumbai, has absorbed Cingular Wireless, and offers 2G service using GSM technology and 3G service using WCDMA technology.

y y

Ping Mobile Tata Indicom Tata Indicom, with its head offices in both Navi Mumbai provides 2G service using cdmaOne and 3G service using CDMA2000 technology.

Tata DoCoMo Tata DoCoMo is joint venture Company of Tata Teleservices and NTT DoCoMo

Reliance Communications Reliance Communications, with its head offices in both Navi Mumbai, Maharashtra provides 2G service using cdmaOne and 3G service using CDMA2000 technology.

Loop Mobile India (Formerly BPL Mobile) Loop Mobile India, is a mobile phone service provider in Mumbai, Maharashtra, India

Emirates Telecom)

Telecommunications

Corporation

(formerly

SWAN

y y y y y y y y

Virgin Mobile Vodafone Essar (Formerly Hutchison Essar/Hutch Orange/Hutch Pink) Videocon Mobile Service (Formerly Datacom Solutions) Uninor MTS India S Tel Virgin Mobile GSM Spice Telecom

CHAPTER-3
COMPANY ANALYSIS

BSNL
Type Industry Founded Headquarters Key people State-owned Telecommunications 19th century, incorporated 2000 New Delhi, India Gopal Das (Chairman) & (MD) Wireless Products Telephone Internet Television Revenue Owner(s) Employees Website US$ 6.95 billion (2009) Government of India 299,840 March 31, 2009 Bsnl.co.in

INTRODUCTION:
Bharat Sanchar Nigam Limited (abbreviated BSNL) is a state-owned telecommunications company headquartered in New Delhi, India. BSNL is one of the largest Indian cellular service providers, with over 75 million subscribers as of October 2010, and the largest land line telephone provider in India. However, in recent years the company's revenue and profit plunged into heavy losses due to intense competition in the Indian telecommunications sector. BSNL is India's oldest and largest communication service provider (CSP). It had a customer base of 90 million as of June 2008. It has footprints throughout India except for the metropolitan cities of Mumbai and New Delhi, which are managed by Mahanagar Telephone Nigam Limited (MTNL). As of June 30, 2010, BSNL had a customer base of 27.45 million wireline and 72.69 million wireless subscribers.

Services:
BSNL provides almost every telecom service in India. Following are the main telecom services provided by BSNL:
y

Universal Telecom Services: Fixed wire line services & landline in Local loop (WLL) using CDMA Technology called bfone and Tarang respectively. As of June 30, 2010, BSNL has 75% market share of fixed lines.

Cellular Mobile Telephone Services: BSNL is major provider of Cellular Mobile Telephone services using GSM platform under the brand name Cellone & Excel (BSNL Mobile). As of June 30, 2010 BSNL has 13.50% share of mobile telephony in the country.

WLL-CDMA Telephone Services: BSNL's WLL (Wireless in Local Loop)service is a service giving both fixed line telephony & Mobile telephony.

Internet: BSNL provides internet services through dial-up connection (Sancharnet) as Prepaid, (NetOne) as Postpaid and ADSL broadband (BSNL Broadband). BSNL holds 55.76% of the market share with reported subscriber base of 9.19 million Internet subscribers with 7.79% of growth at the end of Mar-10.[citation
needed]

Top 12 Dial-up Service

providers, based on the subscriber base, It Also Provides OnlineGames Via Its Games on Demand(GOD)
y

Intelligent Network (IN): BSNL provides IN services offers valueadded services, such as Free Phone Service (FPH), India Telephone Card (Prepaid card), Account Card Calling (ACC), Virtual Private Network (VPN), Tele-voting, Premium Rae Service (PRM), Universal Access Number (UAN) and more.

3G:BSNL offers the '3G' or the'3rd Generation' services which includes facilities like video calling, live TV, 3G Video portal, streaming services like online full length movies and video on demand etc.

IPTV: BSNL also offers the 'Internet Protocol Television' facility which enables usto watch television through internet.

FTTH: Fibre To The Home facility that offers a higher bandwidth for data transfer. This idea was proposed on post-December 2009.

Helpdesk: BSNL's Helpdesk (Helpdesk) provide help desk support to their customers for their services.

Telecom Circles in India:

y y y y y y y y y y y y y y y y y y y y y

Andaman & Nicobar Telecom Circle Dobaspet Tamilnadu Telecom Circle Jharkhand Telecom Circle Bihar Telecom Circle Andhra Pradesh Telecom Circle Assam Telecom Circle Chhattisgarh Telecom Circle Gujarat Telecom Circle Haryana Telecom Circle Himachal Pradesh Telecom Circle Jammu & Kashmir Telecom Circle Jharkhand Telecom Circle Karnataka Telecom Circle Kerala Telecom Circle Madhya Pradesh Telecom Circle Maharashtra Telecom Circle North East-I Telecom Circle North East-II Telecom Circle Orissa Telecom Circle, Rajasthan Telecom Circle Punjab Telecom Circle, Uttranchal Telecom Circle

Metro Districts:
y y y y

Kolkata Chennai Delhi Mumbai

Project Circles:
y y y y y

Eastern Telecom Project Circle Western Telecom Project Circle Northern Telecom Project Circle Southern Telecom Project Circle IT Project Circle, Pune

Maintenance Regions:
y y y y

Eastern Telecom Maintenance Region Western Telecom Maintenance Region Northern Telecom Maintenance Region Southern Telecom Maintenance Regio

Specialized Telecom Units:

y y y

Broad Band Networks (Data Networks) National Centre For Electronic Switching Technical & Development Circle

Production Units:
y y y y

Telecom Factory, Mumbai Telecom Factory, Jabalpur Telecom Factory, Richhai Telecom Factory, Kolkata

Present and future:

BSNL then known as Department of Telecom had been a near monopoly during the socialist period of the Indian economy. During this period, BSNL was the only telecom service provider in the country MTNL was present only in Mumbai and New Delhi). During this period BSNL operated as a typical state-run organization, inefficient, slow, bureaucratic, and heavily unionised. As a result subscribers had to wait for as long as five years to get a telephone connection. The corporation tasted competition for the first time after the liberalisation of Indian economy in 1991. Faced with stiff competition from the private telecom service providers, BSNL has subsequently tried to increase efficiencies itself. DoT veterans, however, put the onus for the sorry state of affairs on the Government policies, where in all state-owned service providers were required to function as mediums for achieving egalitarian growth across all segments of the society. The corporation (then DoT), however, failed miserably to achieve this and India languished among the most poorly connected countries in the world. BSNL was born in 2000 after the corporatisation of DoT. The efficiency of the company has since improved little a bit. However, the performance level is nowhere near the private players.

The corporation remains heavily unionised and is comparatively slow in decision making and its implementation, which largely acts at the instances of unions without bothering about outcome. Management has been reactive to the schemes of private telecom players. Over the past ten years BSNL's management is not able to absorb Group A(ITS) officers, who are working in BSNL illegally as borrowed staff. BSNL board having cronyism in its attitude, has not relieved unabsorbed ITS officers from BSNL despite knowing the fact that their deputation in BSNL is over on 22/12/2008 and they are to be delieved from BSNL as per Department of Personnel and Training (DOPT) Order dated 26/11/2006. DOPT Order dated 26/11/2006 inter-alia states that (1) On completion of deputation period, the deputationist officers will be deemed to have been relieved from the borrowing organisation; (2) If deputationist officers do not report back to the parent department, the disciplinary action must be initiated against him; and (3) The perion of overstay on deputation shall not be treated as qualifying service for the purpose of retirement benefits. BSNL has been providing connections in both urban and rural areas. Pre-activated Mobile connections are available at many places across India. BSNL has also unveiled cost-effective broadband internet access plans (Data One) targeted at homes and small businesses. At present BSNL enjoys around 60% of market share of ISP services.

INDIA BROADBAND: Year of Broadband 2007:

2007 has been declared as "Year of Broadband" in India and BSNL is in the process of providing 5 million Broadband connectivity by the end of 2007. BSNL has upgraded existing Dataone (Broadband) connections for a speed of up to 2 Mbit/s without any extra cost. This 2 Mbit/s broadband service is being provided by BSNL at a cost of just US$ 11.7 per month (as of 21 July 2008 and at a limit of 2.5GB monthly limit with 0200-0800 hrs as no charge period). Further, BSNL is rolling out new broadband services such as triple play. BSNL is planning to increase its customer base to 108 million customers by 2010. With the frantic activity in the communication sector in India, the target appears achievable.

BSNL is a pioneer of rural telephony in India. BSNL has recently bagged 80% of US$ 580 m (INR 2,500 crores) Rural Telephony project of Government of India. On the 20th of March, 2009, BSNL advertised the launch of BlackBerry services across its Telecom circles in India. The corporation has also launched 3G services in select cities across the country. Presently, BSNL and MTNL are the only players to provide 3G services, as the Government of India has completed auction of 3G services for private players. BSNL shall get 3G bandwidth at lowest bidder prices of Rs 18,500 crore, which includes Rs 10,186 crore for 3G and Rs 8313crore for BWA.[One crore is 10 million.]BSNL management has paid this money under protest seeking refund.

Challenges:
During the financial year 2008-2009 (from April 1, 2009 to March 31, 2009) BSNL has added 8.1 million new customers in various telephone services taking its customer base to 75.9 million. BSNL's nearest competitor Bharti Airtel is standing at a customer base of 62.3 million. However, despite impressive growth shown by BSNL in recent times, the Fixed line customer base of BSNL is declining. In order to woo back its fixed-line customers BSNL has brought down long distance calling rate under OneIndia plan, however, the success of the scheme is not known. However, BSNL faces bleak fiscal 20092010 as users flee. Presently there is an intense competition in Indian Telecom sector and various Telcos are rolling out attractive schemes and are providing good customer services. Access Deficit Charges (ADC, a levy being paid by the private operators to BSNL for provide service in non-lucrative areas especially rural areas) has been slashed by 20% by TRAI, w.e.f. April 1, 2009. The reduction in ADC may hit the bottomlines of BSNL. BSNL has started 3G services in 290 cities and acquired more than 6 Lakh customers. It has planned to roll out 3G services in 760 cities across the country in 2010-11. Broadband services: The shift in demand from voice to data has revolutionized the very nature of the network. BSNL is poised to cash on this opportunity and has planned for extensive expansion of the Broadband services. The Broadband customer base of 3.56 Million customer in March'2009 is planned to be increased to 16.00 million by March 2014. Now bsnl is the under top five telecom service provider company in India.

VISION, MISSION & OBJECTIVES OF BSNL

VISION:
To become the largest telecom Service Provider in Asia.

MISSION:
1. To provide world class State-of-art technology telecom services to its

customers on demand at competitive prices. 2. To Provide world class telecom infrastructure in its area of operation and to contribute to the growth of the country's economy.

OBJECTIVES:
1. To be a Lead Telecom Services Provider. 2. To provide quality and reliable fixed telecom service to our customer and thereby increase customer's confidence. 3. To provide mobile telephone service of high quality and become no. 1 GSM operator in its area of operation. 4. To provide point of interconnection to other service provider as per their requirement promptly.

Contribute towards:
1.National Plan Target of 500 million subscriber base for the country by December 2010. 2. Broadband customers base of 20 million in the country by 2010 as per Broadband Policy 2004. 3. Providing telephone connection in villages as per government policy. 4. Implementation of Triple play as a regular commercial proposition.

BSNL IN VISHAKAPATNAM
 Visakhapatnam District comprises an area of 11,161 Sq.KMs.  Total Population of the District is 38,32,336.  (Urban: 1530899; Rural: 2301437).

BSNL, Visakhapatnam is serving many Major Industries in Visakhapatnam like

y HPCL (Hindusthan Petroleum) y Coromandel Fertilizers y Hindustan Zinc Ltd y Hindustan Ship Yard, y Ship Building Centre y Visakha Dairy y Indian Oil Corporation y BHPV y Essar Steel Pellatisation Plant y L.G Polymers y NALCO (National Aluminum Company) y DCI (Dredging Corporation of India) y INDIAN NAVY y Educational Institutions like AU, GITAM etc., y APEPDCL, GVMC etc., and many more

Visakhapatnam Telecom District is

y y having 10 SDCAs consisting of 42 Mandals having the New Technology switches like OCB and EWSD along with CDOT technology y having 98 exchanges and 4 DLCs in the SSA o Urban exchanges: 28 o Rural : 70

(Including 12 Tribal exchanges)

Working Lines as on 30-11-2010:

Land Line WLL Cellular Connections Prepaid Postpaid Total Broad Band the Customer Service Centers : 107725 (98 exges+4 DLCs) : 9160 (WLL BTSs: 59) :( Cell BTSs: 194) : 232539 : 8126 : 240665 : 31000 (Facility extended to all the exchanges in VM SSA)

Major developments after formation of BSNL

y Launching of Cellular services y Launching of WLL Services y Commissioning of OAN (Optical fibre) network y Commission of Broadband services y Commissioning of Cell MSC : 01-12-2002 :12-03-2004 :2005 : March 2005 :11-11-2005

y Complete conversion of Landline connections to new technology: 2006 y Commissioning of Optical Fibre Ring routes y Commissioning of WLL MSC y Commissioning of Wimax services y PRBT Services commissioned y Commissioning of 3G services : 2006 :08-06-2007 :February 2009 :22-04- 2009 : 31-03-2010 (with 60 BTSs)

Working connections of Landline, WLL and Broadband

No of Tele Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (till Nov 10) 98 116885 30829 exges 86 93 93 96 96 96 96 96 98 98 LL +WLL wkg conns 143635 155405 158424 153772 157382 155286 151059 138780 127431 119330 BB 0 0 0 0 0 4110 5439 14096 20609 27274

BTSs installed and Working connections of Cell Services

No of BTSs Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010(till Nov 10) 194 232539 8126 240665 commissioned ----12 20 39 50 75 89 139 146 Prepaid ----10380 24225 41364 59058 77436 83046 113048 163289 Postpaid ----1123 1980 3386 4126 4447 5881 6499 7530 Total ----11503 26205 44750 63184 81883 88927 119547 170819

BSNL Teledensity in Visakhapatnam District Year 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 (till Nov10) 116885 240665 357550 3832336 9.33 LL+WLL 143635 155405 158424 153772 157382 155286 151059 138780 127431 119330 Cell 0 0 11503 26205 44750 63184 81883 88927 119547 170819 Total 143635 155405 169927 179977 202132 218470 232942 227707 246978 290149 pop 3832336 3832336 3832336 3832336 3832336 3832336 3832336 3832336 3832336 3832336 Teledensity 3.75 4.06 4.43 4.70 5.27 5.70 6.08 5.94 6.44 7.57

VISAKHAPTNAM Revenue District Telecom District

42 Mandals

10 SDCAs 98 LL exchanges 25 Customer Service Centers

38.32 Lacks Population

116885 (LL+WLL) Subscribers 240665 Cellular Connections

11161 Sq Km Area

31000 Broadband Connections 194 Cell Towers/ WLL Towers 24 WIMAX Sites 59

Growth rate (on LL+WLL+Cell) 10.00 9.00 8.00 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00

Growth rate (on

250000

200000

No working connections (LL) WLL

150000 Cell Prepaid connections(Gross) 100000 Cell Postpaid connections(Gross) Broad Band Coonections

50000

0 0 -0

0 1 -0

0 2 -0

0 3 -0

0 4 -0

0 5 -0

0 6 -0

0 7 -0

2 0

2 0

2 0

2 0

2 0

2 0

2 0

2 0

2 0

2 0

0 8 -0

1 2 9 0 0 -1 0 1 9(T 1 il 0 lN

200001 No working conn (LL) WLL Cell Prepaid connectio ns(Gross) Cell Postpaid connectio ns(Gross) Broad Band Connecti ons

200102

200203

200304

200405

200506

200607

200708

200809

200910

201011 (TillNo v10)

1436 35 ---

1554 05 ---

1584 24 ---

1534 37 335

1541 48 3234

1512 08 4078

1461 14 4945

1323 35 6445

1189 74 8457

1102 02 9128

107725 9160

---

---

1038 0

2422 5

4136 4

5905 8

7743 6

8304 6

1130 48

1632 89

232539

---

---

1123

1980

3386

4126

4447

5881

6499

7530

8126

5424

1409 6

2060 9

2727 4

30829

Penetration of Broadband connections against Landline connections

Year

LL

BB

Penetration %ge 2.72 3.72 10.65 17.32 24.75

2005 2006 2007 2008 2009

151208 146114 132335 118974 110202

4110 5439 14096 20609 27274

2010 (till Nov 10)

107725

30829

28.62

Facilities offered to Customers

Year
March 2003 May 2005 July 2005 May 2008 October 2008 July2009

Facility offered
Mobile van collections ECS facility Collection of bills by banks e-seva BSNL PORTAL & online transfer (e-payment) AP online services

No of customer service centers: 25 (Urban: 16; Rural 9)

MAJOR PROJECTS OBTAINED through Enterprise Business:

1. APEPDCL Leased Circuits for online project 2. APSDMS (Disaster Management) project 3. IGRS project to all Registrars office in Visakhapatnam District 4. APSWAN Project to all 42 Mandal HQ 5. 34 Mb links to NSTL, NIC, Navy.

Major Media developmentsAfter forming BSNL

1. Three major STM 16 rings formed in Visakhapatnam city to protect all the exchanges with alternate routes and to give feature of issuing leased circuits from any exchange with STM1 connectivity. 2. Two major STM 16 rings formed in rural exchanges of Visakhapatnam district with ring protection and to extend the media from any exchange area.
3. Three Nos. of 10G RPR rings with 24 nodes commissioned for

Broadband network in entire Visakhapatnam SSA with ring protection to Broadband Equipment.

Developments in Lands & Buildings

Construction of buildings --Vempadu Seethammadhara Pendurthy --Cell sites acquired ----4 3 10

Year 2000 2001 2002 2003 2004

Lands Acquisition ----Seethammadhara --Parawava Rambilli, Sabbavaram, Atchutapuram, Tagarapuvalasa, Anandapuram, Madhurawada, Narsipatnam Kasimkota, Nathavaram Rolugunta

2005 2006 2007

------Dabagardens building vertical expansion ---Mindi Tele exge bldg horizontal expansion, Dabagardens Admn bldg, Narsipatnam Tele exge bldg.

24 3 15

2008 2009

-----

13 4

2010 (till Nov 10)

---

72 sites under Phase V.I

Finally, Visakhapatnam SSA is losing its staff strength gradually .. while strengthening the BSNL year by year !!

Year
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010(till Nov 10)

Staff strength
2041 2041 2008 1997 1982 1955 1903 1843 1805 1682 1640

Chapter-4
THEORITICAL FRAME WORK OF WORKING CAPITAL MANAGEMENT

WORKING CAPITAL MANAGEMENT

DEFINITION:
Working capital refers to the cash a business requires for day- to-day operations or more specifically, for financing the conversion of raw

materials into finished goods, which the company sells for payment. Among the most important items of working capital are level of inventory, accounts receivable, and accounts payable. Analysis looks at these items for signs of companys efficiency & financial strength.

NEED FOR THE STUDY :

The need for the working capital to run the day to day business if the firm cannot be overemphasized. Technically working capital management is an integral part of overall financial management. It focuses on the administration of all aspect of current assets namely cash, marketable securities, debtors, stock and current liabilities which have substantial importance in growth of a business concern. Working capital requirements of a firm are influenced by the nature of business fluctuations, size, production cycle operating efficiency, credit policy etc.trading and financial firms have a very less investment in fixed assets but require large sum of money to be invested in working capital. Hence this concept has great significance for the trading and financial firms as it is directly related to sales growth.

The firm should aim at maximizing the wealth of its shareholders. In its endeavor to do so a firm should earn sufficient return from its operations. Earning a steady amount of profit requires successful sales activity. The firm has to invest enough funds in current assets for generating sales. Current assets are needed because sales do not convert into cash immediately. There is always an operating cycle involved in the conversion of sales to cash. Hence in this background of speedy growth of a business and its achievements the organization needs an effective management of working capital. Hence this theme has been chosen to find out the scenario of its financial management with particular reference to WORKING CAPITAL MANAGEMENT of the company as it is generally a key factor for the success of the organization.

CLASSIFICATION OF WORKING CAPITAL:

CONCEPT On this basis there are two types of Working capital

GROSS WORKING CAPITAL:

1. Optimum investment in current assets

2. Financing of current assets Another aspect of gross working capital points to the needs of arranging funds to finance current assets. Whenever a need for working capital funds arises due to an increasing level of business activity, arrangement should be made quickly.

NET WORKING CAPITAL:

Net working capital refers to the to the different between the current assets and current liabilities. Current liabilities are those claims of an outsider which are expected to mature for payment with in an accounting year and include creditors, bill payable and outstanding expenses. NET working capital can be positive or negative working capital will arise if the current assets are more than current liability. Negative working capital will arise if the current liabilities exceed the current assets. TIME BASES:
PERMANENT /FIXED WORKING CAPITAL :

Permanent or fixed working capital is the minimum amount which is required to ensure effective utilization of fixed facilities and for maintaining the circulation of current assets, which is continuously required by the enterprise to carry out its normal business operations. For e.g. every firm has to maintain a minimum level of raw materials, working progress finished goods and cash balance .the minimum level of current assets is called perm or fixed working capital, as this part of capital permanently block in current assets. As the business grows the required amount of permanent working capital also increase due to the increase in current assets.

The permanent working capital can be further classified into:

1 .Regular working capital: Regular working capital is required to ensure the circulation of current assets from cash to inventories from inventories to receivables and from receivables to cash and so on.

3. Reserve working capital: It is the excess amount over the requirement for regular working capital which may be provided for contingencies that may arise at unstated periods such as strikes, rises in prices, depressions.

TEMPORARY OR VARIABLE WORKING CAPITAL: Temporary or variable working capital is the amount of working capital, which is required to meet the seasonal demand and some special exigencies. Variable working capital can be further classified as

A: Seasonal working capital: Most of the enterprise has to provide additional working capital to meet the seasonable and special needs. The capital required to meet seasonal needs of the enterprise is called working capital.

B: special working capital: Special working capital is a part of working capital which is required to meet special exigencies like launching of extensive marketing campaigns for conducting research.

Importance of adequate working capital: Working capital is the life blood of any enter prise.Maintaing enough working capital is very essential to maintain smooth running of a business. No business can run successfully without an adequate amount of working capital. The main advantage of maintaining adequate working capital is as follows: 1 .Solvency of business Adequate: Adequate working capital helps in maintaining solvency of a business by providing uninterrupted flow of production. 2 .Goodwill: Sufficient working capital enables business men to make prompt Payment and hence helps them in creating flow of production.

3. Easy loans: A concern having adequate which solvency and good credit standing can arrange loans from bank and other on easy and favorable terms. 4. Cash discounts: Adequate working capital also enables a concern to avail cash discount on the purchases and hence it reduces costs. 5. Regular supply: sufficient working capital ensures regular supply of raw materials and continues production. 6. Regular payment of salaries wages and other day to day commitment: A company which has ample working capital can make regular payment of salaries wages and other day to day commitments which raises the morale of its employee increasing their efficiency ,reduces wages and costs and enhances production and profits. 7. Exploitation of favorable market conditions: Only concerns with adequate working capital can exploit the favorable market conditions such as purchase its requirements in bulk when prices are lower and by holding its inventories for higher prices.

8. Face business crises: Adequate working capital enables a concern to face business crisis in emergencies such as depression because during such periods generally there is much pressure on the working capital. 9. Quick and regular return on investment: Every investor wants a quick and regular return on his investment. Sufficient working capital enables a concern to pay quick and regular dividend to its inventors as there may not be much pressure on to plough back the profite.This gains confidence of its investors and creates a favorable market to raise additional funds in the future 10. High morale: Adequacy of working capital creates an environment of security confidences and creates an overall efficiency in the business.

NEED FOR ADEQUATE WORKING CAPITAL: The need and importance of adequate working capital for day to day requirement can be hardly underestimated. Every firm must maintain a sound working capital position otherwise its business activities may be adversely affected. The financial manager must see that the firm has sufficient working capital as and when required so that the fixed assets of the firm are optimally used. The objective of financial management is to maximize the shareholders wealth cant be attained if the operations of the firm are not optimized. The every firm must have adequate working capital.

DISADVANTAGE OF EXCESSIVE WORKING CAPITAL: 1. Excessive working capital means the idle funds, which earn no profit for the business ,and hence the business cannot earn a proper rate of return on its investments 2. When there is a redundant working capital it may lead to unnecessary purchases and accumulation of investments of investors causing more chances of theft waste and losses. 3. Excessive working capital implies excessive debtors and ineffective credit policy, which may cause higher incidence on bad debts. 4. It may result in to overall inefficiency in the organization. 5. When there is excessive working capital relationships with banks and other financial institutions may not be maintained. 6. Due to low rate of return on investments the value of shares may also fall 7. The redundant working capital give rise s rise to speculative transactions.

INADEQUATE WORKING CAPITAL: Every business concern should have adequate working capital to run its business operations. It should have neither excess working capital nor inadequate. Both are bad for the business. However inadequate can be more dangerous because: y A concern that has inadequate working capital cant pay its short term liabilities in time. Thus it will lose its reputation and shall not be able good credit facilities y It can buy its requirements in bulk and cant avail of discounts etc. y It becomes difficult for the firm to exploit favorable market conditions and undertake profitable project due to lack of working capital. y The firm cant pay day expenses of its operations and it creates inefficiency increasing costs and reduces the profits of the business. y It becomes impossible to utilize efficiency the fixed assets due to non availability of liquid funds. y The rate of return on investment also falls with the shortage of working capital.

NET WORKING CAPITAL AS A QUALITATIVE CONCEPT: y It indicates the liquidity position y Suggests the extent to which working capital needs may be financed by the permanent sources A negative working capital position poses threat to the solvency of the firm. Excessive liquidity is also bad for the company as it may lead to mismanagement of current assets. Net working capital also covers the question of judicious mix of long term and short term funds of financing current assets. There fore working capital should be financed by permanent source of funds such as owners capital debentures long term debt and preference capital In summary, it is emphasized that both gross and net concept of working capital are equally important for effective management of working capital. The data and problems of each company should be analyzed to determine the amount of working capital. It is not feasible in practice to finance current assets by short term source only. Keeping in view the constraints of individual company a mix of long term finances should be invested in current assets. Since the current assets involve cost of funds they should be put to productive use.

SOURCES OF WORKING CAPITAL: The working capital requirement should be met from both short term as well as long term source of funds. It will be appropriate to meet at least TwoThirds if not all of the permanent working capital requirements from Long term sources. The financing of working capital through short term sources of funds has the benefits of low cost establishing close relationships with banks. Financial of working capital from long term source provides:  Reduction in risk science the need to repay loans at frequent intervals is eliminated.  Increases the liquidity since the firm needed not worry about the payment of these funds in the near future The finance manager has to make use of both long term and short term sources of funds in such a way that the Overall cost of working capital is the lowest and the funds are available for the period they are really needed.

APPROACHES FOR DETERMINING THE FINANCING MIX: There are three basic approaches for determining the working capital financing mix. 1. THE HEDGING APPROCH: According to this approach the maturity of the source of funds should match the Nature of assets to be financed. The approached is therefore also termed as Matching approach it divides the requirements of working capital funds into two categories. y Permanent working capital: That is fund which required for the

purchase of core current assets such fund do not very over time.

2. THE CONSERVATIVE APPROCH: According to this approach all requirements to working capital should be met from long term sources. The short term source s should be used only for emergencies. The conservative approach is less risky but more costly a compared to the hedging approach. In other words conservative app is low profits, low risk while hedging approach result in high risk and low cost low net working capital.

3.TRADE OFF BETWEEN HEDGING AND CONSERVATIVE APPROACH: The hedging and conservative approach both can give satisfactory results. The level of such trade off will defer from case to case depending upon perception of the risk by persons involved in fin decision making. However one way of determining the level of trade off is by finding the average of the minimum and maximum requirement of the working capital during a period. The average working capital so obtained may be filled again either by long term funds or short term funds. DETERMINANTS OF WORKING CAPITAL: The working capital requirement of a concern depends upon a large no. of factors like nature and size of business, the characteristics of their operations, the length of production cycle, rate of stock turnover and the state of economic situation. It is not possible to rank them because all of them are of equal importance and their significance to business changes over time. However the following are important factors generally influencing the working capital requirement.

FACTORS: 1. Nature or character of business: The working capital requirements of a firm basically depend upon the nature of its business. Publics utility undertaking like electricity water supply and railway need a very small amount of working capital because they offer cash sale only and supply services not production and as such no funds are tied up in inventories and receivables. On the other hand trading and financial funds require less inventories in fixed assets but have to invest large amounts in current assets like inventories and such they need large amount of working capital.

2.Size of business/ scale of operations: The working capital requirements of a concern are directly influenced by the size of its business, which may be measured, by its scale of operations. Greater the size of business unit generally the larger will be the requirement of working capital. However in some cases even a smaller concern will need more working capital due to high over head charges inefficient use of available resources other economic disadvantages of small size.

3.Production policy: In certain industries the demand is subject to idle fluctuations due to seasonal variations. The requirement of working capital in such cases depends upon the production policy. The production could be kept either steady by accumulating inventories during slack periods with view to meet high demand during peak season or the production could be curtailed during the slack season. If the policy is to keep production steady by accumulating inventories it will require high working capital

4. Manufacturing process/length of production cycle: In manufacturing process the requirements of working capital increase in direct proportion to the length of manufacturing process. Longer the process period of manufacturing longer the manufacturing time. The raw material supplies have to be carried for longer period in the process with progressive increments of labour and service costs before the finished product is obtained.

5. Seasonal variations: In certain industries raw material is not available throughout the year. They have to buy raw materials in bulk during the season to ensure an uninterrupted flow and process them during the entire year. A huge amount is therefore blocked in the form of inventories during such periods which give rise to more working capital requirement. Generally during the busy season a firm requires larger working capital than in the sick season.

6. Working capital cycle: In a manufacturing concern the working capital cycle starts with purchase of raw materials and ends with the realization of cash from sales of finished products. This cycle involves purchase of raw materials and stores its conversion into stock of finished products through work in progress with progressive increment of labor and service costs. Conversion of finished stock into sales, debtors and receivables and realization of cash and this cycle continues again from cash to purchase of raw material and so on

7. Rate of stock Turnover: There is a high degree of inverse correlation ship between the quantity of working capital and the velocity or speed with which the sales are affected. A firm having high rate of stock turnover will need lower amount of working capital as comp to a firm having low rate of turnover. For e.g. in case of precious stone dealers the stock turnover Is very slow they have to maintain a high variety stocks and the movement of stocks is very slow. Thus the working capital requirements of such a dealer shall be high.

8 .credit policy: The credit policy of a firm in its dealings with debtors and creditors influences considerably the requirement of working capital. A concern that purchases its requirements on credit and sells its products or services on cash requires lesser amount of working capital. On the other hand a concern buying its requirements for cash and allowing credit to its customers shall need larger amount of working capital as very large amount of funds shall be tide in debtors or Bills receivables.

9. Business cycles: Business cycles refer to all expense and contained in the business activity. In a period of boom i.e., when the business is prosperous, there is a need for larger amount of working capital, due to increase in sales rise in prices optimal expansion of business etc. on the country in times of depression i.e., when the business contracts sales decline and large amount of working capital may remain idle.

10. Earning capacity and dividend policy: Some firms have more earning capacity then others due to quality products. Monopoly conditions etc. such firms with high earnings capacity may generate cash profits from operations and contributing to their working capital. The dividend policy of a concern also influences the requirement of its working capital. A firm that maintains a steady high rate of cash dividend irrespective of its generation of profits needs more working capital then a firm that retains a large part of its profits and does not pay so high a rate of cash dividend.

11. Price-level changes: Changes in the price level also affect the working capital requirements. Generally the rising prices will require that a firm maintain a high level of working capital as more funds will be required to maintain the same current assets. The effect of rising prices may be different for different firms. Some firms may be affected much while some may not be affected at all.

12. Rate of growth of business: The working capital requirements of a firm increase with growth and expansion of its business activities. Although it is difficult to determine the relationship between growth in volume of business and growth in working capital of a business, yet it may be concluded for the rate of expansion of a business. 13. Other factors: Certain other factors such as operational efficiency, Management ability, regularity of supply, Import policy assets structure, Import of labor, Banking facilities etc also influence the requirement of working capital.

NATURE OF WORKING CAPITAL Working capital refers to current assets.

Current Assets:

y The assets which are convertible into cash/ equivalent with in a period of one year or less. y Those which are required to meet day to day expenses. The fixed assets as well as the current assets require funds. The management of working capital involves different concepts or methodology then techniques used in fixed assets management. The very basis of fixed assets decision process, capital budgeting and working capital decision process are different. The fixed assets involve the long term perspective and therefore the concept of time value of money is applied in order to discount future cash inflow; where as working capital time horizon is limited to one year and time value of money concept is not considered. The fixed assets affect the long term profitability of the firm while the current assets affect the short term liquidity position of the firm so, in working capital management the finance manager is faced with a decision involving some consideration as follows: y What should be the total investment in working capital of the firm. y What should be the level of current assets. y What should be the relation different sources to finance working capital requirements. The working capital requires both medium term planning as well as immediate adaptations to changes arising due to fluctuations in operating levels of the firm.

STUDY OF WORKING CAPITAL MANAGEMENT

a) Management of cash balances b) Management of accounts Receivables c) Management of Inventory

MANAGEMENT OF CASH BALANCES:

Cash is the most important factor in financial management. It is also important current assets for the operation of a firm or a business. Every activity in n enterprise revolves around the cash. As cash is limited in every enterprise & cant be raised as and when needed, it is therefore desirable that available cash be managed properly. Cash management involves:

a) Controlling level of cash b) Controlling outflow of cash c) Controlling inflow of cash

CASH MANAGEMENT: The term cash has two meanings with respect to cash management. In the narrow sense it includes coins and currency notes and other generally accepted equivalents of cash as cheques, drafts and demand deposits .In a broader sense it not only includes cash and equivalents but also Near cash assets like marketable securities and time deposits in banks.

MOTIVES FOR HOLDING CASH: The firms cash needs may be attributed to following needs: a) Transaction Motive b) Precautionary motive c) Speculative Motive

Transaction Motive: Firms need cash to meet their transaction needs. The collection of cash is not perfectly synchronized with the disbursement of cash. Hence some cash balance is required as a buffer. Precautionary motive: There may be some uncertainty about the magnitude and timing of cash inflow from sale of goods and services, sale of assets and issuance of securities. Likewise there might be uncertainties about the cash outflows on account of purchases or other obligations. To protect itself against such uncertainties a firm requires some cash balance.

Speculative Motive: Firms would like to tap profit making opportunities from fluctuations in commodity prices security prices interest rates and forex rates. A cash rich firm is better prepared to exploit such bargains. Meeting cash disbursement: The basic objective of cash management is to meet all payment and obligations in time. This requires maintenance of sufficient cash funds to meet the payment schedules of raw material suppliers workers and bank etc.

1. Minimum funds held up as cash balances: The second objective of cash management is to maintain minimum cash balances. A large amount of cash balance ensures the liquidity and all its advantages but it also implies very high cost as large funds remain idle because cash is a non-earning assets.

2. Determining optimum cash needs There are three approaches to work out optimum balances to be maintained by any firm .These are: 1) Minimum cash model 2) Minimum cash model with precautionary balances 3) Cash budget The first two budgets are mathematical.

CASH BUDGET: Cash budget is probably the most important device for planning, controlling the use of cash. It aims at maintaining adequate cash balance to meet all cash obligations but at the same time avoiding the excessive balances. It involves the estimation of all future cash inflow and outflows of the firm over vary intervals of time.

Objectives of cash management:

There are two basic objectives of cash management. They are 1) To meet the cash disbursement needs as per payment schedule 2) To meet the amount of funds help up as cash balance

Management of Receivables: Introduction of receivable: The well-known from of trade credit is book debt also refferd to as debtors or accounts receivables. When a seller extends credit to a buyer mutual trust is implicit in the transaction. This transaction has three dimensions. First it embraces an element of risk which needs to be assumed. Cash transactions covering immediate payment in exchange for goods and services is totally risk less. Second it based on economic value. The economic value in goods passed to the buyer currently in return for an equivalent economic value expected from him later. Third it implies futurity. The payment for value received arises at future date.

(a) Factors influencing size of receivable: In most of the business enterprise investments in account receivables from a major part of the working capital. The problem of receivables is basically a problem of balancing profitability and liquidity. The factors influencing size of receivables area when a concern wants to expend its activities it will have to enter new markets. To attract new customers it will give incentives in the form of credit facilities. In the early stages of expansion more credit becomes essential and size of receivables will be more. b) Relationships with profits: The credit policy is followed with a view to increase sales. When sales increase beyond a certain level the additional costs incurred are less than the increase in revenues. The increase in profit will be followed by an increase in size of receivables.

c) Credit collection efforts: The collection of credit should be stream lined. The customer should be sent periodical remainders if they fail to pay in time. Efficient credit collection machinery will reduce the size of receivable. d) Habits of customer: The paying habit of customers also has a bearing on size of receivable. The customers may be in the habit of delaying payments even though they are financially sound.

Cost of maintain receivables: The following of the credit policy to customers means giving funds for customer to use. The concern incurs the following cost on maintaining receivable.

a) Cost of financing receivables: When goods and services are provided on credit then concern capital is allowed to be used by the customer. The receivables are financed by the funds supplied by share holder for long term finance and through retained earnings. b) Cost of collection: A proper collection of receivable is essential for receivable management. The customers who do not pay the money during a stipulated credit period are sent remainders for early payment. In some cases legal recourse may have to be taken for collecting receivables c) Default cost: Some customers may fail to pay the amounts due towards them. The amount which the customer fails to pay is known as the default payments.

POLICY FOR MANAGING THE RECEIVABLES: The credit policy of any firm should be estimated in such a way that the benefits likely to acquire from it the credit policy should incorporate the following

1) Credit standards: The term credit standard represents the basic criterion for the extension of credit to any customer. This is done with the help of factors such as credit ratings and credit references and various financial factors. The credit standards of the customers of a firm are usually determined by 5Cs namely a) Capacity: It refers to the ability of the specific customer to manage required sales of business b) Character: It refers to the integrity of the customer i.e., his willingness to pay his dues c) Collateral: It refers to the security in the form of assets owned by customers which can be offered by the customers to secure the amount of credit extended to him d) Capital: It refers to the financial soundness of customers i.e., his capacity to raise required funds e) Conditions: It refers to the impact of economic environment of the country on the firm or special circumstances offered by government which may affect the customers to meet the obligations. 2) Credit term: This refers to the stipulations under which the goods are sold to on credit i.e., terms and conditions of trade relating to repayment. The two components are:

a) Credit period: It refers to the duration of time for which the credit is extended. This is the period available to the customer to pay off his dues b). Cash discount: It refers to that amount of discount which is given to the customer on paying his debts off with in the stipulated period. Therefore it has implications on the sales volume average collection period, bad debt and profit percent. 3) Collection procedures: The third decision area in management of receivables is the collection policies. The policy must be strict and lenient. a. Sending a remainder for payments b. Personal request through the telephone c. Personal visit to customers d. Taking help of collecting agencies e. Taking legal action

INVENTORY MANAGEMENT INTRODUCTION Every enterprise needs inventory for smooth running of its activities. It serves as a link between production and distribution processes .It also provides a cushion for future price fluctuations. The greater requirements for inventory. The investment in inventory constitutes the most significant part of the current assets, working capital in most of the undertakings. The purpose of inventory management is to ensure availability of materials in sufficient quantity as and when required.

Meaning and nature of inventory The dictionary meaning of inventory is stock of goods or list of goods. The word inventory is understood differently by different authors

Nature of inventory: a) Raw materials: Raw materials from a major input in to the organization .They are required to carry out production activities

uninterruptedly. The factors like availability of raw materials and government regulation too affect the stock of materials b) Work in progress: The work in progress is that stage of stock which is ready in between raw materials and finished goods

c) Finished goods: There are goods which are ready for the consumers. The stock of finished goods provides a buffer between the production and market.

OBJECTIVES OF INVENTORY MANAGEMENT: The following are the objectives of inventory management.:1) To ensure continuous supply of materials spares and finished goods so that production should not suffer at any time. 2) To maintain investment in inventory at optimum level as required by operational and Sales activities 3) To keep material cost of production & overall cost to minimum. 4) To eliminate duplication in ordering or replenishing the stock.

Tools and techniques of inventory management The following are the tools for inventory management 1) Determine the stock levels 2) Determine the EOQ 3) ABC analysis 4) VED analysis 5) Inventory turnover FINANCIAL WORKING CAPITAL: Working capital requirement of a concern can be classified as: a) permanent working capital b) temporary or variable working capital The fixed proportion of working capital is generally financed from the long term sources while the temporary or variable working capital requirement of a concern may be financed from short term source of capital. The various sources for the financing of working capital are as follows: Permanent/fixed working capital 1. Shares 2. Debentures 3. Public deposits 4. Ploughing back of profits 5. Loans from financial Institutions.

CHAPTER-5
ANALYSIS OF WORKING CAPITAL MANAGEMENT

Calculation of working capital in the year 2005-2006

S.NO Particulars (current assets) 1. 2. 3. 4 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16. Building material Lines and wires cables Apparatus and plants Telephone and telex instruments Telegraph and telex spares Broad band equipments Raw material(at factory) Finished goods(at factory) Finished stock (at various circles) Stores Excess/ (short)in inventory account Sundry debtors Cash and bank balances loans and advances inventories Gross working capital/ total (A) At the beginning of the year 01-042005(Rs in lacks) 400 12,300 104,564 65,548 19,365 153 1,474 10,562 1,365 15,369 19,489 1,856 6,63,703 21,93,113 7,52,160 2,24,535 40,85,956 At the end of the year 31-03-2006(Rs in lacks) 534 15,500 1,03,125 1,30,333 19,272 155 1,887 10,985 1,258 15,658 16,015 1,264 6,30,205 30,57,948 9,23,207 2,78,922 52,06,268

S.NO Current liabilities

1. 2. 3. 4. 5. 6. 7. 8.

9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

Sundry creditors Advances received from customers & others Deposits from customers & others Income received in advance against services Claims payable to DOT Claims payable to depts of government of India Claims payable to government companies License fee and transponder changes payable Excise duty payable Payable for revised wages Salary and incentive payable to employees Payable to SAARC countries Liabilities for services Liabilities for construction account Claims payable for USO tower Other provisions for expenses Other liabilities Interest accrued but not due on deposits Total of liabilities (B) Net working capital (AB)

At the beginning of the year 0104-2005(Rs in lacks) 5,64,235 65,258 5,86,565 48,489 48,753 15,864 63,654 42,696

At the end of the year 31-032006(Rs in lacks) 498365 27,256 525864 47589 54,961 17,654 65,864 45,846

20,984 82,981 512 61,854 40,458 14,489 3,964 16,60,756 24,25,200

19,631 85,693 465 59,894 38,658 15,856 3,846 15,07,442 36,98,826

ANALYSIS OF WORKING CAPITAL IN THE YEAR 20052006

The above table shows the working capital for the year 2005-2006 current assets like cables, telephone and telex instruments, finished goods, stores, excess/(short) in inventory accounts sundry debtors decreased to compare the previous year 2005.

Building material, lines and wires, apparatus and plants, telegraph and telex spares, brand band equipments, raw material, finished stock, cash and bank balances, loans and advances and inventories, has increased compare the last year.

The current liabilities like claims payable to DOT, claims payable to departments of government of India, claims payable to government companies, license fee and trandsponder changes payable, salary and income payable to employees and other liabilities were increased by the last year.

Finally working capital had increased by in the year 2005-2006.

Calculation of working capital in the year 2006-2007

S.NO

Particulars (current assets) Building material Lines and wires cables Apparatus and plants Telephone and telex instruments Telegraph and telex spares Broad band equipments Raw material(at factory) Finished goods(at factory) Finished stock (at various circles) Stores Excess/ (short)in inventory account Sundry debtors Cash and bank balances loans and advances inventories Gross working capital/ total (A)

1. 2. 3. 4 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

At the beginning of the year 01-042006(Rs in lacks) 534 15,500 1,03,125 1,30,333 19,272 155 1,887 10,985 1,258 15,658 16,015 1,264 6,30,205 30,57,948 9,23,207 2,78,922 52,06,268

At the end of the year 31-03-2007(Rs in lacks) 466 16,354 1,06,839 83,342 19,268 149 1,395 11,108 1,078 15,932 13,016 2,186 5,58,066 37,45,296 7,14,431 2,42,847 55,31,773

Current liabilities S.NO 1. 2. 3. 4. 5. 6. 7. 8. Sundry creditors Advances received from customers & others Deposits from customers & others Income received in advance against services Claims payable to DOT Claims payable to depts of government of India Claims payable to government companies License fee and transponder changes payable Excise duty payable Payable for revised wages Salary and incentive payable to employees Payable to SAARC countries Liabilities for services Liabilities for construction account Claims payable for USO tower Other provisions for expenses Other liabilities Interest accrued but not due on deposits Total of liabilities (B) Net working capital (A-B)

At the beginning of the year 01-042006(Rs in lacks) 4,98,365 27,256 5,25,864 47,589 54,961 17,654 65,864 45,846

At the end of the year 31-03-2007(Rs in lacks) 5,97,419 24,176 6,13,555 39,027 48,521 12,469 68,584 40,644

9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

19,631 85,693 465 59,894 38,658 15,856 3,846 15,07,442 36,98,826

18,930 84,692 569 62,649 37,154 16,252 3,275 16,67,916 38,63,857

ANALYSIS OF WORKING CAPITAL IN THE YEAR 20062007

An analysis balance sheet of the BSNL, for the years 2006-2007 has Rs. 52, 06,268 lacks were as it is 5531773 for the year 2006-2007. There is an increase of 325505 lacks.

The total of current assets i.e., gross working capital has been increased than the last year. And also total liabilities increased by the last year.

Finally working capital had increased by in the year 2006-2007.

Calculation of working capital in the year 2007-2008

S.NO Particulars (current assets) Building material Lines and wires cables Apparatus and plants Telephone and telex instruments Telegraph and telex spares Broad band equipments Raw material(at factory) Finished goods(at factory) Finished stock (at various circles) Stores Excess/ (short)in inventory account Sundry debtors Cash and bank balances loans and advances inventories Gross working capital/ total (A) At the beginning of the year 01-042007(Rs in lacks) 466 16,354 1,06,839 83,342 19,268 149 1,395 11,108 1,078 15,932 13,016 2,186 5,58,066 37,45,296 7,14,431 2,42,847 55,31,773 At the end of the year 31-032008(Rs in lacks) 344 14,696 1,32,359 1,20,566 19,257 150 10,632 12,572 952 15,348 20,189 150 5,46,551 40,55,158 7,44,441 3,22,006 60,15,371

1. 2. 3. 4 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

S.NO

Current liabilities

1. 2. 3. 4. 5. 6. 7. 8.

9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

Sundry creditors Advances received from customers & others Deposits from customers & others Income received in advance against services Claims payable to DOT Claims payable to depts of government of India Claims payable to government companies License fee and transponder changes payable Excise duty payable Payable for revised wages Salary and incentive payable to employees Payable to SAARC countries Liabilities for services Liabilities for construction account Claims payable for USO tower Other provisions for expenses Other liabilities Interest accrued but not due on deposits Total of liabilities (B) Net working capital (AB)

At the beginning of the year 01-042007(Rs in lacks) 5,97,419 24,176 6,13,555 39,027 48,521 12,469 68,584 40,644

At the end of the year 31-032008(Rs in lacks) 6,06,327 32,802 5,82,676 48,569 37,610 19,176 79,094 4,662

18,930 84,692 569 62,649 37,154 16,252 3,275 16,67,916 38,63,857

141 1,21,318 83,679 251 63,730 1,128 80 41,780 13,524 3,241 17,39,788 42,75,583

ANALYSIS OF WORKING CAPITAL IN THE YEAR 20072008

An analysis balance sheet of the BSNL, for the years 2007-2008 has Rs. 55,31,773 lacks were as it is 60,15,371 lacks for the year 2007-2008. There is an increase of 4, 83,598 lacks.

The total of current assets i.e., gross working capital has been increased than the last year.

The current liabilities has Rs.1667916 lacks where as it is 1739788 lacks for the year 2007-2008. There is an increase of 71872 lacks.

Finally working capital had increased by in the year 2007-2008.

Calculation of working capital in the year 2008-2009

S.NO Particulars (current assets) Building material Lines and wires cables Apparatus and plants Telephone and telex instruments Telegraph and telex spares Broad band equipments Raw material(at factory) Finished goods(at factory) Finished stock (at various circles) Stores Excess/ (short)in inventory account Sundry debtors Cash and bank balances loans and advances inventories Gross working capital/ total (A) At the beginning of the year 01-042008(Rs in lacks) 344 14,696 1,32,359 1,20,566 19,257 150 10,632 12,572 952 15,348 20,189 150 5,46,551 40,55,158 7,44,441 3,22,006 60,15,371 At the end of the year 31-032009(Rs in lacks) 305 15,395 1,49,346 2,14,607 21,111 128 16,384 22,127 1,413 14,165 24,329 63 4,72,054 38,13,430 9,44,880 4,57,258 61,66,995

1. 2. 3. 4 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

S.NO

Current liabilities

At the beginning

At the end of the

of the year 01-04- year 31-032008(Rs in lacks) 1. 2. 3. 4. 5. 6. 7. 8. Sundry creditors Advances received from customers & others Deposits from customers & others Income received in advance against services Claims payable to DOT Claims payable to depts of government of India Claims payable to government companies License fee and transponder changes payable Excise duty payable Payable for revised wages Salary and incentive payable to employees Payable to SAARC countries Liabilities for services Liabilities for construction account Claims payable for USO tower Other provisions for expenses Other liabilities Interest accrued but not due on deposits Total of liabilities (B) Net working capital (AB) 6,06,327 32,802 5,82,676 48,569 37,610 19,176 79,094 4,662 2009(Rs in lacks) 7,95,292 65,889 5,58,034 66,802 27,581 19,185 98,145 (746)

9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

141 1,21,318 83,679 251 63,730 1,128 80 41,780 13,524 3,241 17,39,788 42,75,583

133 2,13,758 86,456 110 75,112 1,201 3,330 39,450 19,859 3,111 20,72,702 40,94,293

ANALYSIS OF WORKING CAPITAL IN THE YEAR 20082009

An analysis balance sheet of the BSNL, for the years 2008-2009 has Rs. 60, 15,371 lacks were as it is 6166995 lacks for the year 2008-2009. There is an increase of 151624 lacks.

The total of current assets i.e., gross working capital has been increased than the last year. And total current liabilities also increased by the last year.

Net working capital for the year 2008-2009 has Rs. 4275583 lacks where as it is Rs. 4094293 lacks for the year 2008-2009. There is an decrease of 181290 lacks.

Finally working capital had decreased by in the year 2008-2009.

Calculation of working capital in the year 2009-2010

S.NO Particulars (current assets) Building material Lines and wires cables Apparatus and plants Telephone and telex instruments Telegraph and telex spares Broad band equipments Raw material(at factory) Finished goods(at factory) Finished stock (at various circles) Stores Excess/ (short)in inventory account Sundry debtors Cash and bank balances loans and advances inventories Gross working capital/ total (A) At the beginning of the year 01-042009(Rs in lacks) 305 15,395 1,49,346 2,14,607 21,111 128 16,384 22,127 1,413 14,165 24,329 63 4,72,054 38,13,430 9,44,880 4,57,258 61,66,995 At the end of the year 31-032010(Rs in lacks) 494 13,564 1,17,164 3,01,530 20,026 119 22,269 17,697 1,366 14,450 22,999 30 4,74,457 30,34,340 13,97,027 5,05,833 59,43,365

1. 2. 3. 4 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16.

S.NO

Current liabilities

At the beginning

At the end of the

of the year 01-04- year 31-032009(Rs in lacks) 1. 2. 3. 4. 5. 1. 2. 8. Sundry creditors Advances received from customers & others Deposits from customers & others Income received in advance against services Claims payable to DOT Claims payable to depts of government of India Claims payable to government companies License fee and transponder changes payable Excise duty payable Payable for revised wages Salary and incentive payable to employees Payable to SAARC countries Liabilities for services Liabilities for construction account Claims payable for USO tower Other provisions for expenses Other liabilities Interest accrued but not due on deposits Total of liabilities (B) Net working capital (AB) 7,95,292 65,889 5,58,034 66,802 27,581 19,185 98,145 (746) 2010(Rs in lacks) 9,89,466 88,389 5,25,912 98,248 18,75,599 15,719 98,173 (42,681)

9. 10. 11. 12. 13. 14. 15. 16. 17. 18.

133 2,13,758 86,456 110 75,112 1,201 3,330 39,450 19,859 3,111 20,72,702 40,94,293

123 4,12,433 76,318 69,608 1,253 3,422 40,696 22,767 2,197 42,77,642 16,65,723

ANALYSIS OF WORKING CAPITAL IN THE YEAR 20092010

An analysis balance sheet of the BSNL, for the years 2009 -2010 current assets has Rs. 61,66,995 lacks were as it is 5943365 lacks for the year 20092010. There is a decrease of 223630 lacks.

The total current liabilities have Rs. 2072702 lacks where as it is Rs. 4277642 lacks for the year 2009-2010. There is an increase of 2204940 lacks.

Finally net working capital has Rs. 4094293 lacks where as it is Rs. 1665723 lacks for the year 2009-2010. There is a decrease of 2428570.

TOTAL GROSS WORKING CAPITAL OF BSNL IN FIVE YEARS PERIOD:

YEARS 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 GROSS WORKING CAPITAL 52,06,268 55,31,773 60,15,371 61,66,995 59,43,365

Gross working capital (Rs. in lacks)

Years

TOTAL NETWORKING CAPITAL OF BSNL IN FIVE YEARS PERIOD:

YEARS 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 NETWORKING CAPITAL 36,98,826 38,63,857 42,75,583 40,94,293 16,65,723

Net working capital (Rs. in lacks)

Years

Chapter-6

 SUMMARY  FINDINGS  SUGGESTIONS  BIBILOGRAPHY

SUMMARY
Finance is one of the basic foundations of all kinds of economic activities. Financial management is one integral part of overall management; it is not a totally independent area it is concerned with the acquisition, financing and management of assets with some overall goal in mind. Finance management as an integral part of overall management is not a totally independent area. It draws heavily on related disciplines and field of study. Such as economics, accounting, marketing, production and quantitative methods. Working capital is an integral of overall corporate management, the finance corporate management the finance manager has to carry out the finance function is the face of risk cannot be predicted with certainty.

The traditional approach to the scope of financial management describes financial management as corporation Finance. It was treated in a narrow sense as procurement of funds by corporate enterprises to meet their financial needs. Working capital management is primary function in the total financial management area. The liquidity, solvency, smooth functioning and the profitability of an organization is basically linked with the working capital decision. To find the financial position of the BSNL in the Telecommunication industry, the focus on the working capital management of the BSNL and find out the effective utilization of working capital.

Research methodology spells out how to achieve the stated research objectives. It constitutes of data collection methods, the specific research instruments and the sampling plans that are to be used for collecting data. Working capital is the life and blood of a business. It signifier the funds to be kept in reserve day to day operations. Working capital management is concerned with the management of the current assets. It is an important and integral part of financial management as short term survival is a pre requisite in long term success Working capital management is concerned with the problems that arise in utter relationship that exist between them. Here, current assets refer to those assets, which in ordinary course of business can be turned into cash with in 1 year without disrupting to operation form. It refers to total current assets (gross working capital) is financial of going concern concept. Gross concept is suitable for the company firm of organization. It is also known as current circulating capital. The liquidity position of a firm is dependent on the investment in current assets, the more, the better where as the role of fixed assets as for as liquidity is concerned negligible. Traditionally the term working capital is defined in two ways. Gross working capital is equal to the total of all current assets concluding loans and advances of company. In the lighting of shorting comings of the traditionally view of working capital there is a needed for evaluating a more expensive definition that highlights the importances of working capital.

FINDINGS
 Working capital management is an important aspect in financial management of every organization; working capital is required to carry on day-to-day activities of the organization.

 this.

BSNL also requires working capital for carrying on its activities like any organization. The accounts office of the organization maintains

       2005.

Financial position of BSNL is not much good.

Working process of BSNL take long time.

There is not good coordination in departments of BSNL.

Handwriting work is more than computerizing work.

Qualification of employees is not match his posts.

Salary of employees is much better.

At present time, investment of BSNL is less than compression year

SUGGESTIONS
The study has provided with the useful data from the respondents. There has a lot to be recommended. Following are the recommendations:

 There should be improved the working process of BSNL. Because working process of BSNL is take more time.

 Departments of BSNL do not have good coordination. So there should be good coordination in departments of BSNL. If coordination will have good in departments, than there will not has to face any problem in proper work.

 There should be good communication between each departments of BSNL.

 Most of the works are computerized in BSNL, but also at the same time, paper works are being continued in many departments. Being a Communication department, the Dept. should be ideal and paper works are to be minimized.

 As seen from the statistics, there is no considerable investment noticed in the Mobile sector, there is a more demand in Mobile sector, BSNL has to invest in the growing sector. Then only the BSNL will get sufficient returns on investment.

BIBILOGRAPHY

Financial management Financial management Financial management

I.M.PANDEY BHABATOSH BANERJEE M.Y.KHAN & JAIN

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