ashutosh parmar hcc report

8/7/2019 ASHUTOSH PARMAR HCC REPORT

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SUMMER TRAINING PROJECT REPORT

(MBA-035)

On

WORKING CAPITAL MANAGEMENT

AT

HINDUSTAN CONSTRUCTION COMPANY LTD.

LMNHP-EW-II (WB)BARABANKI

Submitted in partial fulfilment of Master of Business Administrationprogramme: (2009-011)

Of

Uttar Pradesh Technical University, Lucknow

SUBMITTED BY

ASHUTOSH PARMAR

MBA 3RD SEMESTER

0901470013

FACULTY OF MANAGEMENT SCIENCE

Sri Ram Murti Smarak College of Engineering & Technology, Bareilly


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Sri Ram Murti Smarak College of Engineering & Technology, Bareilly

FACULTY OF MANAGEMENT SCIENCE

CERTIFICATE

This is to certify that Mr. ASHUTOSH PARMAR, a regular student of M.B.A. 2009 Batch has

undergone Summer Training in HINDUSTAN CONSTRUCTION COMPANY LTD. On the topic of

WORKING CAPITAL MANAGEMENT for a period of 4 weeks commencing from 28-june-2010

to 28-july-2010.

This Summer Traning Project Report embodies the facts and figures collected and

interpreted by him during the course of Training.

(Dr. Kunwar S Chandra)

Faculty Guide

(ANANT KUMAR SRIVASTAVA) (Dr. S.P. GUPTA)

HOD - MBA DIRECTOR GENERAL


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PREFACE

To start any business, First of all we need finance and the success of that business entirely depends on

the proper management of day-to-day finance and the management of this short-term capital or finance

of the business is called Working capital Management.

Working Capital is the money used to pay for the everyday trading activities carried out by the business

- stationery needs, staff salaries and wages, rent, energy bills, payments for supplies and so on.

Several professors throughout our formal finance education shaped the way we think about corporate

finance, and part of their contribution can probably be traced in the pages that follow. A considerable

number of MBA students and executives have been exposed, along the past several years, to the

discussion in this Report. The interaction with them, their interest and passion, and their real-life

examples and cases surely helped me to refine and redefine the ideas that we present in this Report. I

am indebted to them all.

I have tried to put my best effort to complete this task on the basis of skill that I have achieved during

the last one year study in the institute.

I have tried to put my maximum effort to get the accurate statistical data. However

I would appreciate if any mistakes are brought to my by the reader

Finally, we would like to thank our families for supporting us unconditionally.


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ACKNOWLEDGEMENT

It is my pleasure to place on record my sincere gratitude towards Mr. Manish Agarwal (HR Manager)

& Mr. Sudershan Kadari (Head of Account Dept.) HCC Limited my supervisor who spent his

precious time providing continuous ideas and expert guidance to my Report work. It was his direction

and encouragement at every moment and step that motivated me to steer the research work confidently

and successfully.

I am thankful to faculty guide K.S Chandra whose encouragement, moral support provides the

valuable guidance, which has been a source of inspiration to us.

I especially thankful to Dr. S.P Gupta who provides me valuable guidance, which helpful to fulfilment

my Project Report.

I would also like to thanks All Member of Account Department of HCC & my friends who directly or

indirectly helped me lot to fulfilment my Project Report.

Last but not the least, I would like to pray our divine source of inspiration Shri Ram Murti whose

blessing always behind us.

(ASHUTOSH PARMAR)

MBA (FINANCE)


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DECLARATION

I am Ashutosh Parmar, Roll no. 09011470013 a student of MBA third Semester of Shri Ram Murti

Smarak College of Engineering and Technology, Bareilly hereby declare that the summer training

project report on the topic WORKING CAPITAL MANAGEMENT is my original work and the

same has not been submitted for the award of any other diploma or degree.

PLACE

Bareilly (ASHUTOSH PARMAR)


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CONTENTS


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Sr.No Particulars Page no.

PART 1

1 Company Profile1.1 Indian Construction Industry 11

1.2 Company Brief 141.3 Group Profile 18

1.4 Vision & Mission 271.5 Awards and honours 29

1.6 CSR 321.7 Lucknow Works 38

2 Introduction of Working Capital

2.1 Meaning of Working Capital 432.2 Concept of Working Capital 45

2.3 Importance of Adequate of Working Capital 482.4 Disadvantage of Excess of Working Capital 49

2.5 Disadvantage of Inadequate Working Capital 502.6 Factor determining requirement of Working Capital 51

2.7 Working Capital Management 542.8 Working Capital Analysis 56

PART 2

3 RESEARCH METHODOLOGY

3.1 Research Methodology 59

3.2 Objective of Study 60

3.3 Data Analysis & Interpretation 61

3.4 Conclusion & Suggestion 86

3.5 Bibliography 88

3.6 Annexure 89


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LIST OF FIGURES

TOPIC PAGE NO.

FIG 1 CURRENT ASSETS RATIO 63

FIG 2 QUICK RATIO 65

FIG 3 ABSOLUTE LIQUID RATIO 67

FIG 4 INVENTORY TURNOVER RATIO 70

FIG 5 INVENTORY CONVERSION RATIO 71

FIG 6 WORKING CAPITAL TURNOVER RATIO 76

FIG 7 INVENTORIES 77

FIG 8 CASH AND BANK BALANCE 78

FIG 9 CURRENT ASSETS 80

FIG 10 CURRENT LIABILITIES 81

FIG 11 NET WORKING CAPITAL 82


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PART 1


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CHAPTER 1 - COMPANY BREIF

1.1 INDIAN CONSTRUCTION INDUSTRY

The evolution of Indian Construction Industry was almost similar to the construction industry

evolution in other countries: founded by Government and slowly taken over by enterprises.

After independence the need for industrial and infrastructural developments in India laid the

foundation stone of construction, architectural and engineering services.

The period from 1950 to mid 60s witnessed the government playing an active role in the

development of these services and most of construction activities during this period were

carried out by state owned enterprises and supported by government departments. In the first

five-year plan, construction of civil works was allotted nearly 50 per cent of the total capital

outlay.

The first professional consultancy company, National Industrial Development Corporation

(NIDC), was set up in the public sector in 1954. Subsequently, many architectural, design

engineering and construction companies were set up in the public sector (Indian Railways

Construction Limited (IRCON), National Buildings Construction Corporation (NBCC), Rail

India Transportation and Engineering Services (RITES), Engineers India Limited (EIL), etc.)

and private sector (M N Dastur and Co., Hindustan Construction Company (HCC), Ansals,

etc.).


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In the late 1960s government started encouraging foreign collaborations in these services. The

Guidelines for Foreign Collaboration, first issued in 1968, stated that local consultant would be

the prime contractor in such collaboration.

The objective of such an imposition was to develop local design capabilities parallel with the

inflow of imported technology and skills. This measure encouraged international construction

and consultancy organisations to set up joint ventures and register their presence in India.

In India Construction has accounted for around 40 per cent of the development investment

during the past 50 years. Around 16 per cent of the nation's working population depends on

construction for its livelihood. The Indian construction industry employs over 3 crore people

and creates assets worth over Rs 20,000 crore.

It contributes more than 5 per cent to the nation's GDP and 78 per cent to the gross capital

formation. Total capital expenditure of state and central govt. will be touching Rs.

8,02,087crores in 2011 12 from Rs. 1,43,587 crores (1999 2000).

The share of the Indian construction sector in total gross capital formation (GCF) came down

from 60 per cent in 1970-71 to 34 per cent in 1990-91. Thereafter, it increased to 48 per cent in

1993-94 and stood at 44 per cent in 1999-2000. In the 21 st century, there has been an increase

in the share of the construction sector in GDP and capital formation.

The main reason for this is the increasing emphasis on involving the private sector

infrastructure development through public-private partnerships and mechanisms like build-

operate-transfer (BOT), private sector investment has not reached the expected levels.


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1.2 COMPANY BREIF

Hindustan Construction Company (HCC) was incorporated in 1926 is a part of HCC group.

HCC is one of the largest private sector construction companies in India. As a pre-eminent

Indian infrastructure company, established over eight decades ago, HCC has, over the years,

strongly anchored itself to Indias development effort. Today it is acknowledged as a company

that continues to empower India, enabling the nation to surge ahead in different core sectors. At

the heart of all our development efforts is the attempt to touch and improve the quality of life of

people across the length and breadth of the country.

In fact, HCC, as an industry leader in engineering construction, currently nurtures projects that

span across such diverse segments as transportation, power, marine projects, oil and gas

pipeline constructions, irrigation and water supply, utilities and urban infrastructure, all of

which impact the nation of India, and the progress of its people.

HCC, even as you read this, is bringing to bear its wealth of engineering and construction

expertise to develop infrastructure aimed at further propelling the nation forward, into the 21st

century and beyond.

With 80 years of experience in construction, it has successfully executed 300 Bridges, 42 Dams

and Barrages, 13 Hydel and 4 Nuclear Power plants, 140 Kms of Tunnelling and 1,000 Kms of

Roads and expressways.


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HCC executed a majority of Indias landmark infrastructure projects, having constructed more

than 25% of Indias hydro power, and over 50% of Indias nuclear power generation capacities,

2,227 kms of Roads & Expressways and over 200 kms of complex tunnelling in addition to

hundreds of Bridges, Dams and Bridges.

It has receives various certifications such as ISO 9001, ISO 14001 and OHSAS 18001 for its

Quality, Environmental and Occupational Health and Safety Management System

Having established robust Corporate Governance norms, the Company has also set global

benchmarks in the construction industry with the fastest implementation of SAP-ERP coupled

with high levels of complexity across 28 diverse project locations. The complex

implementation of ERP at HCCs hydroelectric projects under construction at altitudes of more

than 11,000 feet in Leh, Jammu and Kashmir, remains the highest location of SAP-ERP

operations in the world.

The Companys real estate subsidiary, HREL, is currently developing a state-of-the-art IT Park

at Mumbai as well as free Indias largest Hill City, Lavasa, a 3 hour drive away from Mumbai.

Lavasa is spread across a picturesque landscape of 12,500 acres, set amidst 7 hills and 60 kms

of lakefront.


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Date of Establishment 1926

Revenue 761.213 (USD in Millions)

Market Cap 38044.383494 (Rs. In Millions)

Corporate Address Hincon House, Lal Bahadur Shastri Marg, Vikhroli

(West) Mumbai-400083, Maharashtra

Business Operation Engineering-Construction

Background Hindustan Construction Company (HCC) was

incorporating in 1926 is a part of HCC group. HCC is

one of the largest private sector construction

companies in India.

With 80 years of experience in construction, it has

successfully executed 300 Bridges, 42 Dams and

Barrage, 13 Hydel and 4 Nuclear Power Plants, 140

Km

Financials Total Income Rs.34478.8 Million (year ending Mar

2010)

Net Profit Rs. 814.4 Million (year ending Mar

2010)


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HISTORY

SETH WALCHAND HIRACHAND (FOUNDER)

Walchand Hirachand, the son of a cloth merchant in Sholapur, Maharashtra, dared to dream big. As a

nationalist, he found British rule offensive and resolved early in his life to fight it - not by joining the

political struggle but by breaking the rules that forbade Indian businessmen from entering areas of

enterprise that challenged British monopolies. By the end of his life, he left behind an empire that is

considering the foundation of modern transport in India.

The empire included companies that built aircraft, ships and automobiles, and companies that

specialized in heavy engineering and construction. For his endeavors and achievements, Seth

Walchand Hirachand is known as the Father of the Indian Transportation Industry.


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1.3 HCC GROUP

HCC Construction

HCC is an integrated group spanning Engineering & Construction, Real Estate, Infrastructure

and Urban development & Management. The HCC group of companies comprises HCC Ltd

(Engg & Construction), and its subsidiaries HCC Real Estate Ltd, HCC Infrastructure Ltd,

Lavasa Corporation Ltd. and Karl Steiner AG, a recent acquisition in Switzerland.


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Corporate Responsibility remains intrinsic to HCC, encompassing HIV, Education, Water, and

Disaster Management initiatives. With a view to create a greater AIDS awareness in the

industry, the company has been instrumental in launching a Work Place Intervention (WPI)

program, covering more than 21,000 construction workers across HCC's countrywide project

locations.

In line with its commitment to making water sustainability and stewardship a corporate priority,

HCC is the only Company in India which endorses the United Nations Global Compact's CEO

Water Mandate of which its Chairman & Managing Director Mr. Ajit Gulabchand is a

signatory, joining business leaders around the world in urging key governments to take action

in a number of areas - Direct Operations; Supply Chain and Watershed Management;

Collective Action; Public Policy; Community Engagement; and Transparency.

HCC's most important asset is its talented manpower, which is committed to construction

standards of the highest quality. The group has a knowledge asset of more than 3,000 officers,

including approximately 2,000 engineers; and employs more than 35,000 workers at its 50

project sites across India.


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HCC infrastructure, a wholly owned subsidiary of HCC Ltd, is a leading infrastructure

developer engaged in the creation and management of assets in the areas of Transportation,

Power, Water and Social Infrastructure.

HCCs belief in the Public Private Partnership (PPP) model and its decision to enter the Design,

Build, Finance, Operate and Transfer (DBFOT) business is part of a larger business plan. While

investing in infrastructure assets is a natural progression of HCCs inherent ability to operate in

most domains of engineering & construction, HCC Infrastructure is building expertise in asset

development and management that extends to concept innovation, evaluation of risk and return

and delivering the brands promise to the customer over the life of the asset.

HCC Infrastructure remains committed to developing a premium portfolio of infrastructure

assets that will serve Indias needs while creating shareholder value for the Company by

generating stable diversified and growing cash flow streams over the long-term. Since its

inception two years ago, HCC Infrastructure has grown its portfolio to Rs. 5,539 crore in 2009-

10. Its current assets under management include six NHAI road concessions, of which one is

operational.


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Badarpur Elevated Highway on NH-2 is a 4.4 km elevated road connecting Delhi to Haryana

and is scheduled for completion in October 2010, three months ahead of schedule.

Dhule Palesner on the NH-3 Maharashtra / MP Border is an 89 kms four lane highway

scheduled to be completed in June 2012. This project is being developed in partnership with

John Laing of UK and Sadbhav Eng Ltd.

Nirmal annuity road project in Andhra Pradesh on NH-7 is a 30 km four lane highway, and

executed three months ahead of schedule. It is currently operational.

In February 2010, the NHAI awarded three contiguous sections of approximately 256 km for

the development of the existing two lanes to four lanes between Bahrampore to Dakhola on

NH-34 in West Bengal. These concessions, worth Rs 3,231 crore, were awarded to HCC

Infrastructure on a DBFOT toll basis with a cumulative grant of Rs 1,033 crore.


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The company plans to grow its road portfolio to Rs 15,000 crore in the next 24 to 30 months,

and will ensure adequate financial tie-ups to fund equity requirements of such projects and also

bid for the newer mega-highway projects. Recently, HCC Infrastructure signed a MoU with

Orascom Construction Industries (OCI), a leading Middle Eastern construction contractor, for

bidding and developing large NHAI projects in India. HIL and OCI will also explore a broader

scope of partnership with the intent of jointly creating a premium portfolio of infrastructure

assets across different sectors in India.

HCC Infrastructure is concurrently evaluating opportunities in Hydro Power and Water, where

HCC has an inherent edge given its EPC capabilities. It is also evaluating opportunities in

Airports and Ports.

HCC Real Estate Ltd. (HREL) is a 100% subsidiary of Hindustan Construction Company Ltd.

(HCC). With inherent skills and resources to develop and execute high - value projects within

stringent compliances, HREL is helping build communities across India. HREL is proud to

Touch the lives of many.


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HREL believes in investing for the future - providing world class quality and using innovative

technology that creates trends through value engineering. The Company strongly believes in

striking a balance between efficient engineering and thoughtful design for sustained

development across all project sites in India.

HREL has developed 247 Park, a state-of-the-art business destination at the heart of the

upcoming IT corridor at Vikhroli (West) in Mumbai. The 1.8 million square feet building,

247Park is India's largest standalone LEED Gold certified green building and is designed to

lower energy costs by 23% while offering a clean and green work environment. HREL has

pioneered new standards for environmental conservation in construction in India, setting

Exemplary standards for efficiency in energy resources.

247 Park was conferred the CNBC AWAAZ-CRISIL- CREDAI Real Estate Awards-2009 in

the category Best Commercial Property in Western Region. It is India's most distinguished

award for excellence in the real estate sector. Among the several features which contributed to

the selection of 247Park for the award were: LEED Gold certification of 247 Park as the largest

stand-alone Green commercial building, central location from major residential areas, excellent

work environment, high standards of safety and security, ample parking, retail and other tenant

friendly 24x7 conveniences, energy savings of 23.89%, zero waste discharge and a roof top

helipad.


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With the zeal to execute projects to world class levels, we plan to foray into integrated

townships, hospitality and resorts, corporate and IT Parks and campus developments in the

future.

Lavasa is Free India's first and largest Hill city, which is being developed by HCC. Located in

the picturesque landscape of the Sahayadri Mountains, Lavasa, is an all- new city in the

making, with a master plan of 12,500 acres, and is set amidst 7 hills and 60 km. of lakefront. It

is a 3 hours drive from Mumbai and an hour away from Pune.

The master plan of Lavasa has been developed by internationally renowned design consultant

HOK, USA. Lavasa's design has received three international awards Best Master Plan from

the Congress of the New Urbanism, USA, and Award of Excellence for the Dasve master plan

and an Honor Award for the Mugaon Master Plan from the American Society of Landscape

Architects.

The Lavasa Master Plan, based on the principles of new urbanism, brings together all the


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components essential to daily life in a more organized manner thus creating spaces within

walking distance from each other

Lavasa offers exceptional infrastructure and is the first Indian city developed using

Geographical Information System (GIS). Biomimicry, a new science that uses nature as a

model, measure and mentor is also actively incorporated in the development of Lavasa. Lavasa

aims to provide a perfect work - life balance with a unique combination of technology and

infrastructure advancements. It also offers a diversity of work possibilities designed to appeal

to the IT and biotech industry, KPOs and R&D companies, as well as the world of art, fashion

and animation

A complement of global leaders in Hospitality (Accor, ITC), Health and Wellness (Apollo

Hospitals) and Education (Said Business School, Oxford University, Ecole Hoteliere de

Lausanne - Switzerland, GDST - UK, International Business Relations (IBR) - Germany,

NSHM Knowledge Park - Kolkata, Symbiosis, Christ University Bangalore, Christel House)

have already been tied up. Space World, a 65-acre edutainment park powered by technology

from USSRC and NASA, will offer a space-like experience to visitors, and will be operational

by the 2010.

Lavasa is planned for a permanent population of 2 lakh residents and a tourist inflow envisaged

at 20 lakh per annum. The first town Dasve is slated to be ready by 2010. Lavasa is a prime

offering from HCC, with a level of city infrastructure yet to be experienced in India, thus

setting a new benchmark in planning, construction and service delivery.


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1.4 MISSON

y To be a leading construction company in the global market.

y To become the customers most preferred choice by attaining excellence in

quality and timely complete value added projects.

y To continually innovate, develop and adopt state-of-the-art technology in methods

and materials to enhance productivity and cost effectiveness.

y To continually improve the competence of our people and make them proud to

work at HCC.

y To build a safety culture aimed at continually reducing the frequency severity rate

towards achieving zero accidents.

y To identify and mitigate all the environmental impacts arising from our activities

and comply with applicable environmental norms.

y To develop and adopt eco-friendly concrete technology to reduce one million tons

of greenhouse gas (GHG) emissions in the next 10 years.

y To contribute to the development of the local community and society at large as a

part of our corporate social responsibility.


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VISION

"To be the Industry Leader and a Market - Driven Engineering Construction Company

renowned for excellence, quality, performance and reliability in all types of construction"

The Vision Statement has been inspired by the global infrastructure development needs of

tomorrow, with the Customer as the central focus. It was developed after conducting a series of

in-house workshops. Senior Leaders within the organization are actively involved in

developing and maintaining an effective and efficient management system to disseminate the

Vision across HCC in order to achieve Customer Delight".

The HCC Corporate Mission is derived from the Vision Statement to encompass the overall

strategies, objectives and goals of the Organization.


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1.5 AWARDS & RECOGNITION

2009

Infrastructure Leader of the Year to Mr Ajit Gulabchand under Infrastructure Excellence

Awards 2009 in association with CNBC TV18

2008

Best Concrete Structure Award for the year 2007-2008: To Gosikhurd Spillway Project, the

award is conferred by the India Concrete Institute

Golden Peacock Innovation Award for the year 2008 for Kudankulam Nuclear Power Project

by the Golden Peacock Awards Jury, under the Chairmanship of Justice P N Bhagwati, former

Chief Justice of India and Member UN Human Rights Commission

Most Outstanding Bridge National Award for the year 2008 for Bandra Worli Sea Link Project

by an independent jury of bridge engineering experts from the Indian Institution of Bridge

Engineers (IIBE).

2007

Golden Peacock Award for Excellence in Corporate Governance - 2007 conferred by the

Institute of Directors (IOD), under the Chairmanship of Justice P N Bhagwati, former Chief

Justice of India and Member of Human Rights Commission


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Golden Peacock Award for Occupational Health & Safety - 2007 by IOD (Institute of

Directors) in association with World Environment Foundation (WEF)

Bandra - Worli Sea Link Project, Mumbai

DemoJAM - SAP Summit 2007: 1st prize for best innovation at handling Construction Aids

(CONA) material in SAP implementation

2006

Golden Peacock National Quality Award for the Year 2006 in the category for Private Large

Service by IOD (Institute of Directors) in association with World Environment Foundation

(WEF)

International Star Award for Quality in the Gold Category for the year 2006 by Business

Initiative Directions (BID), Madrid, Spain

2005

National Award for Fly Ash Utilization for the year 2005 for Use of Flyash Based Self

Compacting Concrete at Nuclear Power Projects from the Ministry of Power, Ministry of

Environment & Forest and Department of Science & Technology, Government of India


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2004

Indian Concrete Institute, U.P. Allahabad Centre - Best Structure Award for the year 2004

Concrete Cable Stayed Bridge across river Yamuna at Allahabad

1998

Overseas Construction Council of India - Export Award for the year 1998-99: Maximum

Overseas Construction Contracts Secured

1997

Association of Consulting Civil Engineers (India) - Innovative Design of Structures 1997

Bow String Girder Bridge over river Godavari, A.P. - Somdatt Award

Indian Institution of Bridge Engineers 1995

Godavari Bridge, A.P. - Category II: Steel Superstructure - 1st Prize

Varanasi Bridge, U.P. - Category I: Prestressed Concrete Superstructure - 3rd Prize

Association of Consulting Civil Engineers (India) - Excellence in construction in the field of

Civil Engineering:

Metro Railway Project, Calcutta - Sarvamangala Award


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1.6CORPORATE SOCIAL RESPONSIBILITY

The HIV/AIDS initiative at HCC was launched in the year 2004 and since then, their program

has seen a huge rise in the awareness and acceptance levels for the cause. The program includes

the creation of a group of Peer Educators at a particular project site amongst the workers,

drivers, cleaners, cook, contractors foreman and employees. Under the WPI Program model

we conduct awareness sessions, condom demonstrations and distribution followed by question

and answer sessions. So far, over 21000 workers have been covered through the targeted WPI

program at HCC sites. So far, over 22000 HCC employees and workers have been covered

through the targeted WPI program at HCC sites.

In addition to increasing awareness in the local communities, HCC observe World AIDS Day

on December 1 every year to disseminate information on HIV/AIDS through rallies and

programs with local government hospitals by involving local NGOs, district administration and

local communities.


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Schools and colleges continue to play an important role in shaping the future of tomorrows

society. At HCC, it believes that "Teachers can never truly teach unless they are still learning

themselves". HCC provides opportunities for the faculty of selected colleges (Walchand

Institute of Technology, Sholapur and College of Engineering, Karad) to undergo site execution

training at our sites. Currently we have 2 faculty members from the above institutes undergoing

six weeks training at our sites, with a purpose to expand their knowledge base in their

respective subjects and to enable them to transfer this knowledge to their students.

HCC are also one of the few companies in the construction industry that provide structured

industrial training to the students from different engineering and management institutes. This

practical training is designed to provide the students with the opportunity to put theory into

practice and thus reduce the existing gap between theory and practice. It benefits the students

by helping them develop skills and abilities that support professional studies and prepare them

for work later on.


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For this propose HCC open two institutes which help in this mission of HCC

1. NICMAR

National Institute of Construction Management and Research (NICMAR), founded in

1983, is a pioneering management institute catering to the needs of the construction

industry. In collaboration with peers in the industry, HCC has taken the lead in founding

NICMAR.

2. Walchand College of Engineering

Walchand College of Engineering (WCE) was set up in 1947 at Sangli. Presently, it

offers 6 undergraduate, 9 post-graduate and 4 diploma programmes in various branches

of engineering. In all, about 2500 students are enrolled for all these courses. The

National Board of Accreditation has already accredited the UG programmes.


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The Engineering and Construction Disaster Resource Network (E&C DRN) is a network that

enables mobilising the existing capacities of the E&C community during and after crises to

reduce suffering and save lives. It also helps in safeguarding man, machine and other assets of

the Company during a disaster. HCCs Managing Director, Mr. Ajit Gulabchand is on the

Board of Directors of DRN

Global and serves as the Chairman of the Indian Chapter. Through DRN India, HCC has

provided relief for several natural calamities. In 2009, it helped in the floods in Andhra

Pradesh.


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Water scarcity is prevalent throughout most parts of

The world. Business survival also depends on ensured

Water availability. There is a compelling business case to

Pursue water stewardship and become a water conscious

Company. Therefore, in March 2008, HCC endorsed

United Nations Global Compacts The CEO Water

Mandate initiative.

HCC commits to become a water conscious Company

By implementing the core elements of The CEO

Water Mandate comprising:

(i) water efficiency in its direct operations,

(ii) replenishing watersheds in project areas,

(iii) collective action with other companies and professional bodies for promoting

sewage reuse,

(iv) community engagement for improving water services and water environment and

(v) Constructive contribution for improving long-term public policies on water.


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Highlights 2009-10

Order book increases by 15% to Rs. 18,810 crore

New orders worth Rs. 5,748 crore received during the year

Turnover improves by 10% to Rs. 3,863 crore

Lavasa posts turnover of Rs. 482 crore and PAT of Rs. 140 crore

HCC Infrastructure asset portfolio expands to Rs. 5,539 crore


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1.7 LUCKNOW PROJECT

LMNHP-EW-II (WB)-1

DATE OF AGREEMENT

5 October 2005

EMPLOYER

NATIONAL HIGHWAY AUTHORITY OF INDIA, PLOT NO. G-5&6 SECTORS 10, DWARKA

NEW DELHI 110075

CONTRACTOR

HINDUSTAN CONSTRACTION COMPANY LTD. HINCON HOUSE, LAL BAHADUR SHASTRI

MARG, VIKHROLI (WEST), MUMBAI 4008

CONTRACT

According to contract a 4 laning from km. 09.00 to km 45.00 of Lucknow ayodhya section of

NH-28 in Uttar Pradesh, contract pkg no. LMNHP-EW-II (WB)-1

PRICE

Contract price 198, 06, 99,196/- (Rupees one Hundred Ninety Eight Crore Six Lac Ninety

Thousand One Hundred Ninety Six Only)


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LMNHP-EW-II (WB)-2

DATE OF AGREEMENT

5 October 2005

EMPLOYER

NATIONAL HIGHWAY AUTHORITY OF INDIA, PLOT NO. G-5&6 SECTORS 10, DWARKA

NEW DELHI 110075

CONTRACTOR

HINDUSTAN CONSTRACTION COMPANY LTD. HINCON HOUSE, LAL BAHADUR SHASTRI

MARG, VIKHROLI (WEST), MUMBAI 4008

CONTRACT

According to contract a 4 laning from km. 45.00 to km 92.00 of Lucknow ayodhya section of

NH-28 in Uttar Pradesh, contract pkg no. LMNHP-EW-II (WB)-2

PRICE

Contract price 212, 33, 44,969/- (Rupees Two Hundred Twelve Crore Thirty Three Lac Forty

Four Thousand Nine Hundred Sixty Nine only)


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Contact Us

HEAD OFFICE

Hincon House, Lal Bahadur Shastri Marg

Vikhroli (West), Mumbai - 400 083

BRANCH OFFICE

(a) 9 Syed Amir Ali Avenue,

4th Floor, Kolkata

(b) 102, Tolstoy House 1st Floor

Connaught Place, New Delhi, Delhi 110001


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BOARD OF DIRECTOR

1. Ajit Gulabchand (Chairman & Managing Director)

2. Y. H. Malegam (Director)

3. Rajas R. Doshi (Director)

4. D.M. Popat (Director)

5. Ram P. Gandhi (Director)

6. Fred Moavenzadeh (Director)

7. Sharad M. Kulkarni (Director)

8. Nirmal P. Bhogilal (Director)

9. Anil C. Singhvi (Director)

10. K.G. Tendulkar (Director)

COMPANY SECRETARY

Vithal P. Kulkarni

AUDITORS

K.S. Aiyar & Co., Chartered Accountants

ADVOCATES & SOLICITORS

Mulla & Mulla & Craigie Blunt & Caroe, Kanga & Co.


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REGISTRAR & SHARE TRANSFER AGENT

TSR Darashaw Ltd.

6-10 Haji Moosa Patrawala Industrial Estates,

20, Dr. E. Moses Road, Mahalaxmi, Mumbai - 400 011

BANKERS

ICICI Bank Ltd. Punjab National Bank

State Bank of India IDBI Bank Ltd.

Indian Bank Oriental Bank of Commerce

The Jammu & Kashmir Bank Canara Bank

State Bank of Patiala Union Bank of India

Bank of Baroda Vijaya Bank

ING Vysya Bank Ltd. Standard Chartered Bank

The Federal Bank Ltd. HSBC

Axis Bank Ltd. Exim Bank of India

State Bank of Travancore Bank of Maharashtra

DBS Bank Ltd. State Bank of Bikaner & Jaipur

Catholic Syrian Bank


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CHAPTER 2 WORKING CAPITAL MANAGEMENT

2.1Meaning ofWorking Capital

Working capital could be defined as the portion of assets used in current operations. The

movements of the funds from capital to income and profits and back to working capital are one

of the most important characteristics of the business. This cyclical operation is concerned with

utilization of the funds with the hope that will return with an additional amount called income.

If the operations of the company are to run smoothly, a proper relationship between fixed

capital and current capital has to maintain.

Sufficiently liquidity is important and must be achieved and maintained to provide that

funds to pay off obligation as they arise.

The adequacy of cash and other current assets together with their efficient handling,

virtually determine the survival or demise of the company. A businessman should be able to

judge the accurate requirement of working capital and should be quick enough to raise the

enquired funds to finance he working capital needs.

Working capital is also called as net current assets, it is the excess of current assets over

current liabilities. All organization has to carry working capital. It is important from the point

of view of both liquidity and profitability. Poor management of working capital means that

funds that unnecessarily tied up in idle assets hence educing liquidity and also reducing ability

to invest in productive assets such as plant and machinery. So affecting profitability.


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The term working capital refers to current assets, which may be defined as:

i) Those which are convertible into cash or equivalents with the period of one year and

ii) Those which are required to meet day to day operations,

The fixed as well as current assets, both requires investment of Funds. So the

management of working capital and fixed assets apparently seem to involve it type of

consideration but it is no so. The management of working capital involve different concept and

methodology than the techniques used in fixed assets management.


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2.2 CONCEPT OFWORKING CAPITAL

There are two concepts of working capital:

1. Gross Working Capital

2. Net Working capital

The gross working capital is the capital invested in the total current assets of the enterprises

current assets are those

Assets which can convert in to cash within a short period normally one accounting year.

CONSTITUENTS OF CURRENT ASSETS

1. Cash in hand and cash at bank

2. Bills receivables

3. Sundry debtors

4. Short term loans and advances

5. Inventories of stock as

a. Raw material

b. Work in process


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c. Stores and spares

d. Finished goods

6. Temporary investment of surplus funds

7. Prepaid expenses

8. Accrued incomes

9. Marketable securities

In a narrow sense, the term working capital refers to the net working. Net working capital is

the excess of current assets over current liability, or, say:

NET WORKING CAPITAL = CURRENT ASSENTS CURRENT LIABILITIES

Net working capital can be positive or negative. Current liabilities are those liabilities,

which are intended to be paid in the ordinary course of business within a short period of

normally one accounting year out of the current assets or the income business.

CONSITITUENTS OF CURRENT LIABILITIES

1. Accrued or outstanding expenses

2. Short term loans, advances and deposits

3. Dividends payable

4. Bank overdraft

5. Bills payable

6. Sundry creditors


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The gross working capital concept is financial or going concern whereas net working capital

is an accounting concept of working capital. Both the concepts have their own merits.

The gross concept is sometimes preferred to the concept of working capital for the following

reasons:

(A) It enables the enterprise to provide correct amount of working capital at correct

time.

(B) Every management is more interested in total current assets with which it has to operate

then the source from where it is made available.

(C) It take into consideration of the fact every increase in the funds of the enterprise would

increase its working capital.

(D) This concept is also useful in determining the rate of return on investments in working

capital. The net working capital concept, however, is also important for following reasons:

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

expenses and short-term liabilities.

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

3. It is an indicator of the financial soundness of enterprises.

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

of the permanent sources of funds.


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2.3 IMPORTANCE OR ADVANTAGE OF ADEQUATEWORKING CAPITAL

1. Solvency of the business: Adequate working capital helps in maintaining the solvency of

the business by providing uninterrupted of production.

2. Goodwill: Sufficient amount of working capital enables a firm to make prompt payments

and makes and maintain the goodwill.

3. Easy loans: Adequate working capital leads to high solvency and credit standing can

arrange loans from banks and other on easy and favourable terms.

4. Cash Discounts: Adequate working capital also enables a concern to avail cash discounts

on the purchases and hence reduces cost.

5. Regular Supply of Raw Material: Sufficient working capital ensures regular supply of

raw material and continuous production.

6. Regular Payment of Salaries, Wages and Other Day TO Day Commitments: It leads

to the satisfaction of the employees and raises the morale of its employees, increases their

efficiency, reduces wastage and costs and enhances production and profits.

7. Exploitation of Favourable Market Conditions: If a firm is having adequate working

capital then it can exploit the favourable market conditions such as purchasing its requirements

in bulk when the prices are lower and holdings its inventories for higher prices.

8. Ability to Face Crises: A concern can face the situation during the depression.

9. Quick And Regular Return On Investments: Sufficient working capital enables a

concern to pay quick and regular of dividends to its investors and gains confidence of the

investors and can raise more funds in future.


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6. Due to lower rate of return n investments, the values of shares may also fall.

7. The redundant working capital gives rise to speculative transactions

2.5 DISADVANTAGES OF INADEQUATE WORKING CAPITAL

Every business needs some amounts of working capital. The need for working capital arises

due to the time gap between production and realization of cash from sales. There is an

operating cycle involved in sales and realization of cash. There are time gaps in purchase of

raw material and production; production and sales; and realization of cash.

Thus working capital is needed for the following purposes:

1. For the purpose of raw material, components and spares.

2. To pay wages and salaries

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

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

5. To provide credit facilities to the customer.

6. To maintain the inventories of the raw material, work-in-progress, stores and spares and

finished stock.

For studying the need of working capital in a business, one has to study the business under

varying circumstances such as a new concern requires a lot of funds to meet its initial

requirements such as promotion and formation etc. These expenses are called preliminary

expenses and are capitalized. The amount needed for working capital depends upon the size of


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the company and ambitions of its promoters. Greater the size of the business unit, generally

larger will be the requirements of the working capital.

The requirement of the working capital goes on increasing with the growth and expensing of

the business till it gains maturity. At maturity the amount of working capital required is called

normal working capital.

There are others factors also influence the need of working capital in a business.

2.6 FACTORS DETERMINING THEWORKING CAPITAL REQUIREMENTS

1. NATURE OF BUSINESS: The requirements of working is very limited in public utility

undertakings such as electricity, water supply and railways because they offer cash sale only

and supply services not products, and no funds are tied up in inventories and receivables. On

the other hand the trading and financial firms requires less investment in fixed assets but have

to invest large amt. of working capital along with fixed investments.

2. SIZE OF THE BUSINESS: Greater the size of the business, greater is the requirement of

working capital.

3. PRODUCTION POLICY: If the policy is to keep production steady by accumulating

inventories it will require higher working capital.

4. LENGTH OF PRDUCTION CYCLE: The longer the manufacturing time the raw

material and other supplies have to be carried for a longer in the process with progressive


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increment of labour and service costs before the final product is obtained. So working capital is

directly proportional to the length of the manufacturing process.

5. SEASONALS VARIATIONS: Generally, during the busy season, a firm requires larger

working capital than in slack season.

6. WORKING CAPITAL CYCLE: The speed with which the working cycle completes one

cycle determines the requirements of working capital. Longer the cycle larger is the

requirement of working capital.

7. RATE OF STOCK TURNOVER: There is an inverse co-relationship between the

question of working capital and the velocity or speed with which the sales are affected. A firm

having a high rate of stock turnover will needs lower amt. of working capital as compared to a

firm having a low rate of turnover.

8. CREDIT POLICY: A concern that purchases its requirements on credit and sales its

product / services on cash requires lesser amt. of working capital and vice-versa.

9. BUSINESS CYCLE: In period of boom, when the business is prosperous, there is need

for larger amt. of working capital due to rise in sales, rise in prices, optimistic expansion of

business, etc. On the contrary in time of depression, the business contracts, sales decline,

difficulties are faced in collection from debtor and the firm may have a large amt. of working

capital.

10. RATE OF GROWTH OF BUSINESS: In faster growing concern, we shall require large

amt. of working capital.


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11. EARNING CAPACITY AND DIVIDEND POLICY: Some firms have more earning

capacity than other due to quality of their products, monopoly conditions, etc. Such firms may

generate cash profits from operations and contribute to their working capital. The dividend

policy also affects the requirement of working capital. A firm maintaining a steady high rate of

cash dividend irrespective of its profits needs working capital than the firm that retains larger

part of its profits and does not pay so high rate of cash dividend.

12. PRICE LEVEL CHANGES: Changes in the price level also affect the working capital

requirements. Generally rise in prices leads to increase in working capital.

OTHERS FACTORS: These are:

a. Operating efficiency.

b. Management ability.

c. Irregularities of supply.

d. Import policy.

e. Asset structure.

f. Importance of labour.

g. Banking facilities, etc.


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2.7 MANAGEMENT OFWORKING CAPITAL

Management of working capital is concerned with the problem that arises in attempting to

manage the current assets, current liabilities. The basic goal of working capital management is

to manage the current assets and current liabilities of a firm in such a way that a satisfactory

level of working capital is maintained, i.e. it is neither adequate nor excessive as both the

situations are bad for any firm. There should be no shortage of funds and also no working

capital should be ideal. WORKING CAPITAL MANAGEMENT POLICES of a firm has a

great on its probability, liquidity and structural health of the organization. So working capital

management is three dimensional in nature as

1. It concerned with the formulation of policies with regard to profitability, liquidity and risk.

2. It is concerned with the decision about the composition and level of current assets.

3. It is concerned with the decision about the composition and level of current liabilities.


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2.8WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business. Adequate amount of

working capital is very much essential for the smooth running of the business. And the most

important part is the efficient management of working capital in right time. The liquidity

position of the firm is totally effected by the management of working capital. So, a study of

changes in the uses and sources of working capital is necessary to evaluate the efficiency with

which the working capital is employed in a business. This involves the need of working capital

analysis.

The analysis of working capital can be conducted through a number of devices, such as:

1. Ratio analysis.

2. Fund flow analysis.

1. RATIO ANALYSIS

A ratio is a simple arithmetical expression one number to another. The technique of ratio

analysis can be employed for measuring short-term liquidity or working capital position of a

firm. The following ratios can be calculated for these purposes:

1. Current ratio.

2. Quick ratio

3. Absolute liquid ratio

4. Inventory turnover.

5. Debtors Turnover Ratio


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6. Working capital turnover ratio.

2. FUND FLOW ANALYSIS

Fund flow analysis is a technical device designated to the study the source from which

additional funds were derived and the use to which these sources were put. The fund flow

analysis consists of:

a. Preparing schedule of changes of working capital

It is an effective management tool to study the changes in financial position (working capital)

business enterprise between beginning and ending of the financial dates.


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PART 2


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CHAPTER-3 RESEARCH METHODOLOGY

3.1 Research Methodology

The methodology, I have adopted for my study is the various tools, which basically analyze

critically financial position of to the organization. It is basically secondary data provided by my

supervisor:

I. PROFIT AND LOSS A/C

II. BALANCE SHEET

III. FUND FLOW STATEMENT

V. RATIO ANALYSIS

The above parameters are used for critical analysis of financial position. With the evaluation of

each component, the financial position from different angles is tried to be presented in well and

systematic manner. By critical analysis with the help of different tools, it becomes clear how

the financial manager handles the finance matters in profitable manner in the critical

challenging atmosphere, the recommendation are made which would suggest the organization

in formulation of a healthy and strong position financially with proper management system.

I sincerely hope, through the evaluation of various percentage, ratios and comparative

analysis, the organization would be able to conquer its inefficiencies and makes the

desired changes.


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3.2 OBJECTIVE OF STUDY

Working capital management is very important in modern business. The analysis of working

capital is also very useful for short-term management of funds. The following are objective of

study:

1) To make items wise analysis of the elements or component of working capital to identify

the items responsible for change in working capital.

2) To make study of requirement of working capital in last four year

3) To study increase or decrease in working capital.


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3.3 DATA ANALYSIS & INTERPRETATION

A) LIQUIDITY RATIOS

Liquidity refers to the ability of a firm to meet its current obligations as and when these become

due. The short-term obligations are met by realizing amounts from current, floating or

circulating assts. The current assets should either be liquid or near about liquidity. These should

be convertible in cash for paying obligations of short-term nature. The sufficiency or

insufficiency of current assets should be assessed by comparing them with short-term liabilities.

If current assets can pay off the current liabilities then the liquidity position is satisfactory. On

the other hand, if the current liabilities cannot be met out of the current assets then the liquidity

position is bad. To measure the liquidity of a firm, the following ratios can be calculated:

1. CURRENT RATIO

2. QUICK RATIO

3. ABSOLUTE LIQUID RATIO


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1. CURRENT RATIO

Current Ratio, also known as working capital ratio is a measure of general liquidity and its most

widely used to make the analysis of short-term financial position or liquidity of a firm. It is

defined as the relation between current assets and current liabilities. Thus,

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITES

The two components of this ratio are:

1) CURRENT ASSETS

2) CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables, sundry debtors, inventories

and work-in-progresses. Current liabilities include outstanding expenses, bill payable, dividend

payable etc.

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay

its current obligations in time. On the hand a low current ratio represents that the liquidity

position of the firm is not good and the firm shall not be able to pay its current liabilities in

time. A ratio equal or near to the rule of thumb of 2:1 i.e. current assets double the current

liabilities is considered to be satisfactory.


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TABLE 1 CURRENT RATIO

Year 2008 2009 2010

Current Assets 6501.88 9290.21 5421.63

Current Liabilities 4009.45 4871.63 5095.09

Current Ratio 1.62:1 1.90:1 1.06:1

FIG-1 CURRENT RATIO

Interpretation:-

As we know that ideal current ratio for any firm is 2:1. If we see the current ratio of the company for

last three years it has increased from 2008 to 2009 but decrease in 2010. The current ratio of company

is less than the ideal ratio. This depicts that companys liquidity position is not so good. But its current

assets are more than its current liabilities.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2008 2009 2010

1.62

1.9

1.06

CURRENT RATIO

CURRENT RATIO

Rs in Lacs


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2. QUICK RATIO

Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may be defined as

the relationship between quick/liquid assets and current or liquid liabilities. An asset is said to

be liquid if it can be converted into cash with a short period without loss of value. It measures

the firms capacity to pay off current obligations immediately.

QUICK RATIO = QUICK ASSETS

CURRENT LIABILITES

Where Quick Assets = CURRENT ASSETS PREPAID EXPENSES STOCK

A high ratio is an indication that the firm is liquid and has the ability to meet its current

liabilities in time and on the other hand a low quick ratio represents that the firms liquidity

position is not good.

As a rule of thumb ratio of 1:1 is considered satisfactory. It is generally thought that if quick

assets are equal to the current liabilities then the concern may be able to meet its short-term

obligations. However, a firm having high quick ratio may not have a satisfactory liquidity

position if it has slow paying debtors. On the other hand, a firm having a low liquidity position

if it has fast moving inventories.


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TABLE 2 QUICK RATIOS

Year 2008 2009 2010

Quick Assets 4580.24 4761.42 4253.76


Quick Ratio 1.14 .97 .83

FIG 2 QUICK RATIO

Interpretation:

A quick ratio is an indication that the firm is liquid and has the ability to meet its current liabilities in

time. The ideal quick ratio is 1:1. Companys quick ratio is more than ideal ratio in 2008 but in 2009

and 2010 it is low form idle ratio. This shows company has now suffer from liquidity problem and not

able to meet its current liabilities in time.

0

0.2

0.4

0.6

0.8

1

1.2

2008 2009 2010

1.14

0.97

0.83

QUICK RATIO

QUICK RATIO

Rs in Lacs


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3. ABSOLUTE LIQUID RATIO

Although receivables, debtors and bills receivable are generally more liquid than inventories,

yet there may be doubts regarding their realization into cash immediately or in time. So

absolute liquid ratio should be calculated together with current ratio and acid test ratio so as to

exclude even receivables from the current assets and find out the absolute liquid assets.

Absolute Liquid Assets includes:

ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITES

ABSOLUTE LIQUID ASSETS = CASH & BANK BALANCES.


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TABLE 3 ABSOLUTE LIQUID RATIOS

FIG 3 ABSOLUTE LIQUID RATIO

Interpretation:

These ratio shows that company carries a sufficient amount of cash. And there is increase in this ratio

which means company is in good position and nothing to worry about cash

0

0.05

0.1

0.15

0.2

0.25

2008 2009 2010

0.0096

0.17

0.22

ABSOLUTE LIQUID RATIO

ABSOLUTE LIQUID RATIO

Year 2008 2009 2010

Absolute Liquid Assets 38.52 828.87 1168.39


Absolute Liquid Ratio .0096:1 .17 : 1 .22:1

Rs in Lacs


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B) CURRENT ASSETS MOVEMENT RATIOS

Funds are invested in various assets in business to make sales and earn profits. The efficiency

with which assets are managed directly affects the volume of sales. The better the management

of assets, large is the amount of sales and profits. Current assets movement ratios measure the

efficiency with which a firm manages its resources. These ratios are called turnover ratios

because they indicate the speed with which assets are converted or turned over into sales.

Depending upon the purpose, a number of turnover ratios can be calculated. These are:

1. Inventory Turnover Ratio

2. Debtors Turnover Ratio

3. Working Capital Turnover Ratio

The current ratio and quick ratio give misleading results if current assets include high amount

of debtors due to slow credit collections and moreover if the assets include high amount of slow

moving inventories. As both the ratios ignore the movement of current assets, it is important to

calculate the turnover ratio.


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1. INVENTORY TURNOVER OR STOCK TURNOVER RATIO:

Every firm has to maintain a certain amount of inventory of finished goods so as to meet the

requirements of the business. But the level of inventory should neither be too high nor too low.

Because it is harmful to hold more inventory as some amount of capital is blocked in it and

some cost is involved in it. It will therefore be advisable to dispose the inventory as soon as

possible.

INVENTORY TURNOVER RATIO = CONSUMPTION

AVERAGE INVENTORY

Inventory turnover ratio measures the speed with which the stock is converted into sales.

Usually a high inventory ratio indicates an efficient management of inventory because more

frequently the stocks are sold; the lesser amount of money is required to finance the inventory.

Whereas low inventory turnover ratio indicates the inefficient management of inventory. A low

inventory turnover implies over investment in inventories, dull business, poor quality of goods,

stock accumulations and slow moving goods and low profits as compared to total investment.

AVERAGE STOCK = OPENING STOCK + CLOSING STOCK

2


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TABLE 4 INVENTORY TURNOVER RATIOS

FIG 4 INVENTORY TURNOVER RATIO

Interpretation:

This ratio shows how rapidly the inventory is turning into receivable through sales. From 2008 to 2010

the company has high inventory turnover ratio and consecutive it is increasing. This shows that the

companys inventory management technique is efficient.

0

1

2

3

4

5

6

7

2008 2009 2010

4.36

5.31

6.87

INVENTORY TURNOVER RATIO


Year 2008 2009 2010

Consumption 7437.09 9122.22 9064.04Average Stock 1704.96 1717.51 1318.26

Inventory Turnover Ratio 4.36 times 5.31 times 6.87 times

Rs in Lacs


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2. INVENTORY CONVERSION PERIOD:

INVENTORY CONVERSION PERIOD = 365 (net working days)


TABLE 5 INVENTORY CONVERSION PERIOD

Year 2008 2009 2010

Days 365 365 365

Inventory Turnover Ratio 4.36 times 5.31 times 6.87 times

Inventory Conversion Period 84 day 67 day 53 day

FIG 5 INVENTORY CONVERSION PERIOD

Interpretation: Inventory conversion period shows that how many days inventories takes to convert

from raw material to finished goods. In the company inventory conversion period is decreasing. This

shows the efficiency of management to convert the inventory into cash.

0

10

20

3040

50

60

70

80

90

2008 2009 2010

84

67

53

INVENTORY CONVERSION PERIOD

INVENTORYCONVERSION PERIOD

Rs in Lacs


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3. DEBTORS TURNOVER RATIO:

A concern may sell its goods on cash as well as on credit to increase its sales and a liberal

credit policy may result in tying up substantial funds of a firm in the form of trade debtors.

Trade debtors are expected to be converted into cash within a short period and are included in

current assets. So liquidity position of a concern also depends upon the quality of trade debtors.

Two types of ratio can be calculated to evaluate the quality of debtors.

a) Debtors Turnover Ratio

b) Average Collection Period

DEBTORS TURNOVER RATIO = TOTAL SALES (CREDIT)

AVERAGE DEBTORS

Debtors velocity indicates the number of times the debtors are turned over during a year.

Generally higher the value of debtors turnover ratio the more efficient is the management of

debtors/sales or more liquid are the debtors. Whereas a low debtors turnover ratio indicates

poor management of debtors/sales and less liquid debtors. This ratio should be compared with

ratios of other firms doing the same business and a trend may be found to make a better

interpretation of the ratio.

AVERAGE DEBTORS= OPENING DEBTOR+CLOSING DEBTOR

2


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Interpretation:

Because Hindustan Construction Company Ltd. Have only one Client National Highway Authority of

India and all payment made my NHAI are in Advance for construction of Highway thats why there is

no Debtor for HCC. So that this ratio cant be calculated.


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4. AVERAGE COLLECTION PERIOD:

Average Collection Period = No. of Working Days

Debtors Turnover Ratio

The average collection period ratio represents the average number of days for which a firm has

to wait before its receivables are converted into cash. It measures the quality of debtors.

Generally, shorter the average collection period the better is the quality of debtors as a short

collection period implies quick payment by debtors and vice-versa.

Average Collection Period = 365 (Net Working Days)

Debtors Turnover Ratio

Interpretation:

Because Hindustan Construction Company Ltd. Have only one client National Highway

Authority of India and all payment made by NHAI are in Advance for construction of

Highways thats why there is no Debtor for HCC. So that this ratio cant be calculated.


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5.WORKING CAPITAL TURNOVER RATIO:

Working capital turnover ratio indicates the velocity of utilization of net working capital. This

ratio indicates the number of times the working capital is turned over in the course of the year.

This ratio measures the efficiency with which the working capital is used by the firm. A higher

ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a

very high working capital turnover is not a good situation for any firm.

Working Capital Turnover Ratio = Cost of Sales

Net Working Capital

Working Capital Turnover = Sales

Networking Capital


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TABLE 6 WORKING CAPITAL TURNOVER RATIOS

Year 2008 2009 2010

Sales 5429.76 5053.56 4932.11

Networking Capital 2492.43 1418.58 326.54

Working Capital Turnover 2.17 3.56 15.10

FIG 6 WORKING CAPITAL TURNOVER RATIO

Interpretation:

This ratio indicates low much net working capital requires for sales. In 2010, the reciprocal of

this ratio (1/15.10 = .066) shows that for sales of Rs. 1 the company requires 06 paisa as

working capital. Thus this ratio is helpful to forecast the working capital requirement on the

basis of sale.

0

2

4

6

8

10

12

14

16

2008 2009 2010

2.17

3.56

15.1

WORKING CAPITAL TURNOVER

WORKING CAPITAL TURNOVER

Rs in Lacs


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TABLE 7 INVENTORIES

Year 2007-2008 2008-2009 2009-2010

Inventories 1921.64 1513.40 1160.71

FIG 7 INVENTORIES

Interpretation:

Inventories are a major part of current assets. If any company wants to manage its working

capital efficiency, it has to manage its inventories efficiently. The graph shows that inventory in

2007-2008 is 29%, in 2008-2009 is 24% and in 2009-20010 is 21% of their current assets. The

company have sufficient part of inventories so company have to maintain this.

0

200

400

600

800

1000

1200

1400

1600

1800

2000

2008 2009 2010

1921.64

1513.4

1160.71

INVENTORIES

INVENTORIES

Rs in Lacs


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TABLE 8 CASH BANK BALANCE

Year 2007-2008 2008-2009 2009-2010

Cash Bank Balance 38.52 828.87 1168.39

FIG 8 CASH & BANK BALANCE

Interpretation:

Cash is basic input or component of working capital. Cash is needed to keep the business running on a

continuous basis. So the organization should have sufficient cash to meet various requirements. The

above graph is indicate that in 2007-08 the cash is 38.52 lakh but in 2008-09 it has increase up to

828.87 lakh. The result of that is good because it cant disturb the firms manufacturing operations. In

2009, it is increased upto 1168.39 lakh. So from 2007-08 to 2009-10, the company has increased its

cash balance which shows there is no problem for company to meeting its requirement and company

have sufficient amount of cash.

0

200

400

600

800

1000

1200

2008 2009 2010

38.52

828.87

1168.39

CASH & BANK BALANCE

CASH & BANK BALANCE

Rs in Lacs


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DEBTORS

Interpretation:

Because Hindustan Construction Company Ltd. Have only one Customer National Highway

Authority of India and all payment made by NHAI are in Advance for construction of

Highways thats why there is no Debtor for HCC. So that this ratio cant be calculated.


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TABLE 9 CURRENT ASSETS

Year 2007-2008 2008-2009 2009-2010

Current Assets 6501.88 6290.21 5421.63

FIG 9 CURRENT ASSETS

Interpretation:

As graph shows that there is continuous decrease in current assets from 2007-09 to 2009-10

and in 2009-10 Company current assets are had greater fall from 6290.21 lac to 5421.63 lac

which can decrease companys efficiency.

4800

5000

5200

5400

5600

5800

6000

6200

6400

6600

2008 2009 2010

6501.88

6290.21

5421.63

CURRENT ASSETS

CURRENT ASSETS

Rs in Lacs


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TABLE 10 CURRENT LIABILITY:

Year 2007-2008 2008-2009 2009-2010

Current Liability 4009.45 4871.63 5095.09

FIG 10 CURRENT LIABILITIES

Interpretation:

Current liabilities shows company short term debts pay to outsiders. From 2008 to 2010 the current

liabilities of the company increased. As current assets decreased from 2008 to 2009 but still current

assets are more than its current liabilities. But company have to take step to increase its current assets

as we see in 2010 there is not a big difference between current assets and current liabilities which is

cant ignore because its decrease efficiency of company and may create halt in short term debts pay to

outsiders.

0

1000

2000

3000

4000

5000

6000

2008 2009 2010

4009.45

4871.635095.09

CURRENT LIABILITY

CURRENT LIABILITY

Rs in Lacs


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TABLE 11 NETWOKRING CAPITAL:

Year 2007-2008 2008-2009 2009-2010

Net Working Capital 2492.43 1418.58 326.54

FIG 11 NETWORKING CAPITAL

Interpretation:

Working capital is required to finance day to day operations of a firm. There should be an optimum

level of working capital. It should not be too less or not too excess. In the company there is decrease in

working capital. The decrease in working capital arises because the company has taken more time than

agreement.

0

500

1000

1500

2000

2500

2008 2009 2010

2492.43

1418.58

326.54

NET WORKING CAPITAL

NET WORKING CAPITAL

Rs in Lacs


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TABLE 12 STATEMENT OF CHANGE IN WORKING CAPITAL

PARTICUALAR PREVIOUSYEAR

CURRENTYEAR INCREASE DECREASE

CURRENT ASSETS (A)

CASH & BANK BALANCE

RETENTION DEPOSIT

NET WORKING IN PROGRESS

LOAN AND ADVANCE

STOCK OF MATARIALS

SUNDRY DEBTORS

DEPOSITS

TDS

JV PARTNER RECIVABLE

VAT RECEIVABLE (NET)/WCT

OTHER CURRENT ASSETS

TOTAL CURRENT ASSETS (A)

CURRENT LIABILITIES

BANK OD

DUE TO CLIENT

SUPPLIERS LIABILITIES

DUE TO PIECE RATE

CONTRACTORS

DUE TO SUB CONTRACTORS

AND MACH HIRED

PRW/SUB CONTRACTOR

828.87

915.74

2860.56

77.97

1528.79

(1.66)

7.34

1.38

-

52.94

18.28

6290.21

-

928.66

860.96

32.35

959.16

1168.39

688.66

2014.92

33.46

1167.87

-

7.34

1.38

-

72.93

266.67

5421.63

-

702.49

1628.77

17.11

1447.76

339.52

1.66

19.99

248.39

226.17

15.24

227.08

845.64

44.51

360.92

767.81

488.60

Rs in Lacs


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RETENTION

PAYABLE TO JV PARTNERS

OTHER CURRENT LIABILITIES

PROVISION LIABILITY FOR HO

EXPN.

TOTAL CURRENT LIABILITIES

(B)

WORKING CAPITAL (A-B)

NET INCREASE/DECREASE IN

WORKING CAPITAL

493.33

-

1597.17

-

4871.63

1418.58

716.36

-

582.60

-

5095.09

326.54

1092.04

1014.57

1092.04

223.03

1418.58 1418.58 2957.59 2957.59


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INTERPRETATION

Statement of changes in the working capital is prepared to show the changes in the working

capital between the two balance sheet dates. This statement is prepared with the help of the

current asset and current liabilities derived from the 2 balance sheets

So,

i) An increase in current asset increases working capital

ii) A decrease in current assets decreases in working capital

iii) An increase in current liabilities decreases working capital.

iv) A decrease in current liabilities increase working capital

It is worth noting that schedule of changes in working capital is prepared only from current

assets and current liabilities and the other information is not of any use for preparing this

statement.

The company should look in to the proper current liabilities.

As company current assets are more than current liabilities it can be said that company is in

good health and able to meet its current liabilities


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3.4 CONCLUSION & SUGGESTION

SUGGESTION

1. Company have to see over its debtors

2. Company have to increase its current assets because its current assets are just above to the

safe level.

3. Company have to increase its quick assets so that it can resolve its liquidity problem.

4. Company have to complete its project as soon as possible.


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CONCLUSION

From the above analysis of Hindustan Construction Company ltd. Lucknow Project Working

Capital Management

It is observed that current asset decrease in 2009-10 as compare to 2006-07 to 2008-09 but in

the year 2006-07 to 2008-09 it had been increase from 4173.84 lac to 6290.21 lac and the

current liabilities has been increase from 2006-07 to 2009-10. Current asset decreases in 2009-

10. It shows fluctuation in these years. Working capital of HCC ltd at only in the 2007-08 it

increased reaming year i.e. 2008-09 and 2009-10 it decreases, it means that in the year

excluding 2007-08 working capital falls down which shows the current liabilities

increasing in greater percentage as compare to current asset.

In the 2008-09 and 2009-10 working capital shows the negative trend due to the

increase in the current liability in the condition of the year 2007-08 is increased it shows the

positive trend.

This is happen due to company take more time to complete its project till now company unable

to complete its project. But beside this company is in good position.


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3.6ANNEXURE

PROFIT AND LOSS STATEMENT FOR THE YEAR ENDING 31 MARCH 2010

SR NO PARTICULARS ACTUAL

1 WORK BILL RECIPTS PURE 4932.11

2 ADD CLOSING WIP PURE 2348.34

3 LESS OPENING WIP PURE 3390.70

4 SUB TOTAL PURE 3889.76

5 WORK BILL RECIPTS ESCL 1420.35

6 ADD CLOSING WIP ESCL 43.33

7 LESS OPENING WIP ESCL 59.64

8 SUB TOTAL ESCL 1404.0419 INSURANCE CLAIMS 59.29

MISC. WORK BILL RECEIPTS 589.10

20 ANY OTHER ITEM/ DGFT CLAIM 280.13

21 WORK DONE (INCL. ENCL.)

4+8+20+19

6222.32

22 LESS CLIENTS MATERIAL

23 HCC WORK DONE 6222.32

24 DIRECT VARIABLE COST

A. BUILDING MATERIALS 497.67

B. BOUGHTOUT MATERIALS

C. STORES MATERIALS 251.49D. CONSUMABLE ACCESSORIES 290.72

E. SPARES 149.85

F. POL 974.66

G. MSE ITEMS

H. ELECTRICITY 95.56

I. SUB CONTRACT EXPENSES 5657.10

J. PIECE RATE CONTRACT EXP 476.36

K. WAGES AND SALARIES 566.37

L. OVERTIME 104.27

SUB TOTAL (ATO L) 9064.04

25 CONTRIBUTION (23-24) (2841.72)26 INDIRECT COST

M. EQUIPMENT REPARIS (OUTSIDE 13.74

N. EQUIPMENT HIRE (OUTSIDE 197.77

O. EQUIPMENT LEASE ( OUTSIDE

P. REVENUE EXPENSES 1218.02

Q. INTREST TO CLIENT

R. INTEREST TO OTHERS 6.94


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WORKING CAPITAL STATEMENT FOR THE YEAR ENDING 31 MARCH

2010

SR.NO WORKING CAPITAL ACTUAL

A CURRENT ASSETS

1 CASH & BANK BALANCE 1168.39

2 RETENTION DEPOSIT 688.66

3 WORKING IN PROGRESS

A. PURE 2348.34

B. ESCALATION 43.33

C. OTHERS

D TOTAL WIP A+B+C 2391.67

E. LESS: WORK BILL ADVANCE 376.75

4 NET WIP 3D-3E 2014.92SUB TOTAL 3871.98

5 LOAN AND ADVANCE

A. PIECE RATE CONTRACTORS

B. SUB CONTRACTORS 7.94

C. STAFF AND LABOUR IMPREST 12.84

D. SUPPLIER 12.68

E. OTHERS

SUB TOTAL (A TO E) 33.46

6 STOCK OF MATARIALS

A. HCC MATERIALS 1160.71

B. CLIENT MATERIALSC. MATERIAL IN TRANSIT 7.16

SUB TOTAL A TO C 1167.87

7 SUNDRY DEBTORS

8 DEPOSITS 7.34

9 TDS 1.38

10 JV PARTNER RECIVABLE

11 VAT RECEIVABLE (NET)/WCT 72.93

12 OTHER CURRENT ASSETS 266.67

13 TOTAL CURRENT ASSETS (A) 5421.63

B CURRENT LIABILITIES

14 BANK OD15 DUE TO CLIENT

A. MATERIAL ADVANCE 702.49

B. FOR MATERIAL SUPPLY

C. INTEREST ON ADVANCES

D. ELECTRICITY/RENT/OTHER

E. SUB TOTAL ATO D 702.49

16 SUPPLIERS LIABILITIES 1628.77


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17 DUE TO PIECE RATE CONTRACTORS 17.11

18 DUE TO SUB CONTRACTORS AND

MACH HIRED

1447.76

19 PRW/SUB CONTRACTOR RETENTION 716.36

20 PAYABLE TO JV PARTNERS

21 OTHER CURRENT LIABILITIES 582.60

22 PROVISION LIABILITY FOR HO EXPN.

23 TOTAL CURRENT LIABILITIES B 5095.09

24 NET WORKING CAPITAL (13-23) 326.54


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ashutosh parmar hcc report

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