financial analysis of rswm limited1
TRANSCRIPT
A
Project Study Report
On
Training Undertaken at
“Rajasthan Spinning and Weaving Mills limited
BANSWARA (RAJ.)”
“Financial Analysis of RSWM Limited”
Submitted in partial fulfillment for the
Award of degree of
Master of Business Administration
2
Submitted by:- …………...submitted to:-
xxxxxxxxxxxx Dr. MBA x th Sem. (H.O.D)
(Deepashika college of techinal education, jaipur)
CERTIFICATE
3
PREFACE
Masters of Business Administration is conducted with providing
knowledge to the students regarding various type of management like
financial management, marketing management and production management
etc.
As per the requirement of MBA course Rajasthan Spinning and Weaving Mills limited has been kind enough to permit me to complete my project on “Financial Analysis of RSWM Limited”
This report prepared during the practical training. Which is student’s
first and greatest treasure as it is full of experience, observation and
knowledge.
The summer training was very interesting and gainful as it is close to
real what have been studied is all the years through was seen implemented in
a modified and practical form.
I have done my training in Rajasthan Spinning and Weaving Mills
limited at banswara for 45 .During this training period I have learned about
how to create cloths by raw material like yarn, trading work, and back office
work. I have come to know that how does units of the mil works and how they
trading all over the world and how to manage all the department and made
changes according to the needs of the customers. Thus it was really
beneficial for me in terms of knowledge and experience.
The only fault was that the time available was short and there was
much to learn, yet the things learned shall never be oblivion and are of great
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aid in the near future. I sincerely believe that the research can be useful to the
organization and others as well Rajasthan Spinning and Weaving Mills limited.
It was the please experience for me.
ACKNOWLEDGEMENT
I express my sincere thanks to my project guide, Mr. M.P. Pareek.
Designation DGM, HRD. For guiding me right from the inception till the
successful; completion of the project. I sincerely acknowledge him for
extending their valuable guidance, support for literature, critical reviews
of project and the report and above all the moral support he had
provided to me with all stages of this project.
I would also like to thank the supporting staff Mr. Jitendra
virahyas. For their help and cooperation throughout our project.
xxxxxxxx
5
xth sem.
DCTE. Jaipur
DECLARATION
xxxxxxxxxx S/O xxxxxxxxxxxxxx declares that the project report Titled “Financial Analysis of RSWM Limited” is based on my project study. This project report is my original work and this has not been used for any purpose anywhere.
( xxxxxxxxxxx )
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EXECUTIVE SUMMARY
Books are the treasures of knowledge and a theoretical base is pivotal
for understanding the realities of practical field. But, at the same time,
practical knowledge is crucial for having an insight into the implementation of
theory in corporate world.
With the privilege of an opportunity provided to me by RSWM Ltd. Banswara, for the fulfillment of my purpose “bridging the gap between theory and practical”, I undertook forty-five days summer training at finance department of RSWM Ltd. Banswara. During this training, we conducted a study of project, about “Financial Analysis of RSWM Limited”
Under the project “Financial Analysis of RSWM Limited”, first of all I was provided with the annual report of company to analyze, so
that I could get acquainted with the terms relating to the yarn business,
financial condition depicted by Balance sheet and Profit and Loss Account of
the company, figure relating to import and export etc. We were given the
proposed cash budget and capital expenditure budget after taking into
account assumption relating to credit period allowed, credit period received
etc., for all the departments of RSWM Banswara. Using the financial
statement, then I conducted a compare analysis of Ratios, and on basis of
these, interpreted the financial position of company.
I also determined the working capital operating cycle for the company,
in which I made of accounts payable period, inventory period cash cycle, etc. .
In my training program I also understood the technical aspects of the
various units of RSWM Ltd. Banswara. And they also provide me the
information’s of all the departments of the industry.
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Finally, on the basis of the analysis and the conclusions draw a SWOT
analysis has been done and recommendations given.
Therefore, a financial analysis of working capital of RSWM realizes that the
company has been able to manage its working capital efficiently thereby
strengthening its short term financial position. However, there are certain
areas where the company is lagging and is required to take some effective
steps.
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Contents
1. Introduction To The Industry 8
2. Introduction Of Organization 22
3. Research Methodology 46
3.1. Title of the Study 46
3.2. Duration of the Project 46
3.3. Objective of Study 46
3.4. Type of Research 47
3.5. Sample Size and method of selecting sample 47
3.6. Scope of Study 47
3.7. Limitation of Study 65
4. Facts and Findings 66
5. Analysis and Interpretation 67
6. SWOT 79
7. Conclusion 82
8. Recommendation and Suggestions 83
9. Bibliography 84
(1) INTRODUCTION OF THE INDUSTRY:-
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Rajasthan Spinning & Weaving Mills Ltd. (RSWM), the flagship Company of the LNJ Bhilwara Group. RSWM is primarily engaged in the manufacture of synthetic, blended, mélange and specialty yarns and fabrics.
RSWM is a premier company of the Group, with a turnover of Rs.775 crore
(US$ 177 million). RSWM is exporting a complete range of yarn and fabric to
over 60 countries worldwide, giving RSWM a markedly visible presence
across the textile world.
The manufacturing capacity of the Company is upwards of 81,000 MT
of Yarn per annum from its five units - Gulabpura, Banswara, Mandpam,
Rishabhdev and Ringas located in Rajasthan. RSWM also manufactures 12
million meters of fabric per annum at its Gulabpura unit.
All the plants are equipped with state-of-the-art
machines and Captive Power Generation facilities.
RSWM is the first composite textile mill in India to be
accorded the ISO Certification. The Company also
enjoys a prestigious ‘Three Star Export House’ status
and, over the years, has received several Export
Awards from SRTEPC.
The company’s leadership in the textile industry is exemplified in the
equity that their brands enjoy in the Indian market - place - ‘ Mayur Suitings ‘.
RSWM is in the process of modernization drive and increase of
spindles of its all the manufacturing units. RSWM will soon introduce ready -
to-wear Apparels. To enhance its operating capacity, RSWM has acquired
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Jaipur Polyspin Ltd. for manufacturing of Synthetic Blended Yarn. RSWM has
also acquired a state-of-the-art process house at Mordi, Banswara Rajasthan.
Global Presence
RSWM exports a complete range of yarn and fabric to over 60
countries across Europe, South Africa, Australia, Korea, Belgium, Singapore,
Italy, Egypt and the Gulf countries. With nearly 30% of RSWM's production
exported, the Company has a significant presence in the world of textiles.
RSWM has also been recognized as a Golden Trading House by the
Government of India having won the prestigious SRTEPC Export Award for
several consecutive years. This makes the Company truly global, yet truly
Indian.
distinction of being India's first composite textile mill to be accorded
the coveted ISO 9002 and IS/ISO 9001:2000 certifications. ISO-certified
Quality circles function across all units. Total Quality Management (TQM) has
been implemented at the Banswara unit.
The Group has a highly specialized Yarn Development Center, pilot
plants and a Design & Development Studio for Fabric at Gulabpura,
A Promise to our Heritage
The 60s. A decade of tumultuous change, hope and promise saw John
F. Kennedy take over as the President of the United States; the civil rights
struggle; Woodstock and Neil Armstrong on the moon.
The same decade saw the seeds of enterprise sown in the desert
sands of Rajasthan, in 1961. Starting a small textile unit with 12,500 spindles -
manufacturing Carded Cotton Hosiery Yarn, RSWM added another 13,000
spindles for Synthetic Yarn. This made RSWM the pioneer of Viscose and
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Polyester spinning on the modified Cotton System and Dyed Synthetic Fiber.
This began the spinning of a superlative success story.
A dream that started small but had the passion to grow, to lead, to
show the way. A vision that saw a small textile unit pioneer bloom in the
Synthetic Yarn market, emerging as a leader named RSWM Ltd., or simply
RSWM. A name that now stands for class and quality in Yarn and Fabric.
RSWM is the flagship of the LNJ Bhilwara Group.
Today, the Company has installed over 2,42,000 spindles and over to
weaving machines, with a product range that includes Polyester / Viscose
Yarn and Fabric, Flame Retardant Fabric, Specialty Tencel and Lycra Blends.
RSWM has also built Mayur Suitings into one of India's top textile brands.
A Promise to Deliver
For us, it is not enough to manufacture the finest Blended Yarn, Cotton
Mélange Yarn and Synthetic Yarn and Fabric. The real goal is to ensure that
the finished Yarn and Fabric reach our customers on time, every time.
Over the years, we have evolved proven procedures. Our Centralized
Production Planning Cell (CPPC) has an experienced team of time conscious
production planners. All plants are computerized, which is a key tool towards
productivity enhancement, information dissemination and development.
VSAT links connect all plants and offices with all shipment points
continuously tracking shipping movements, ensuring timely delivery. ERP
systems have been implemented across the board. The use of Palletized
cartons are a standard practice, with direct delivery on containers, proving
that we mean business, and giving us the means to deliver.
A Promise to Care
We are an equal opportunity employer, making no distinctions between
genders, religions, castes or ethnic origins. Our work force is representative of
India's multi-cultural identity and rich and diverse social fabric. Our staff's
welfare is not about corporate ethics but enlightened self-interest. For us they
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are an investment in building our business. Fostering a healthy work-culture
helps us retain our competitive edge.
Workers in all our plants enjoy a host of facilities and benefits...
housing, Medicare, co-operative stores, banking, loans, children's education,
sports and recreation.
We are committed to the enhancement of the professional skills of our
workers and managers. We organize training workshops regularly and send
our Engineers and other key personnel abroad to keep abreast of global
trends in technology, product mix and design. Continuous training has seen
RSWM emerge as the cradle of leadership within the group. Most of the
CEOs of the group companies began their careers here as trainees.
The other focus area is the development of in-house capabilities in
maintenance and servicing. This helps ensure low downtime. To facilitate this,
our engineering talents are deputed to our machinery suppliers' plants to
master maintenance and servicing issues.
A Promise to the Earth
In a culture, where the earth is referred to as Mother, caring for the
environment is ingrained. In caring for the earth we are committed to leaving
our children and the generations to come a clean, green earth. A promise that
we live by and live up to in everything we do.
At every step in the manufacturing process, we employ eco-friendly
processes not just to abide by laws but also to sustain and take forward the
'green' traditions that form a rich part of our heritage. Effluent treatment is
carried out using the latest state-of-the-art technology. All the water used in
fabric dyeing and finishing is recycled for use in the process-house and in
horticulture. We are continuously greening all our plants, residential and other
facilities, planting thousands of saplings every year.
Our environmental care is executed with an eye for detail. The
Banswara unit has over 42,000 square meters of greens, with over 50,000
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plants having been planted on the campus and an exquisite 11-acre orchard
surrounding an artificial lake. The Banswara unit was accorded the best
plantation award in Rajasthan.
So while we 'do' yarns and textiles, we 'think' environment.
A Promise to Perform
When we make a promise, we back it with all that we have - resources,
infrastructure, technology and will power. In the final analysis, what counts is
the way an organization raises up to any challenge and its performance.
State-of-the-art manufacturing facilities at Gulabpura, Banswara,
Rishabhdev and Mandpam in Rajasthan are backed by modern testing
equipment and stringent quality checks on process parameters and quality. All
units and offices have implemented Enterprise Resource Planning (ERP)
Management Systems ensuring timely delivery schedules. All these plants
have captive in-house power generation, avoiding production downtime due to
power-cuts. These facilities are totally self-sufficient in power.
RSWM, Banswara, is the first textile unit in India to implement Total
Quality Management (TQM) in 1997. This was made possible by empowering
the team at the unit to work seamlessly together, forming one cohesive entity,
driven by a single goal... that of ensuring and maintaining the highest quality,
resulting in brilliant overall performance.
A Promise to be One
RSWM's integrated units are spread across the state of Rajasthan,
each handling specialized processes, from raw fiber handling to final product
delivery, on time every time. Each process smoothly collaborates with the
next, ensuring a legacy of supreme quality.
Every Team Member is highly trained in all the latest trends and
technologies. Together they drive themselves to work efficiently around the
clock.
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HISTORY OF TEXTILE INDUSTRY
India has been well known for her textile goods since very ancient
times. The traditional textile industry of India was virtually decayed during the
colonial regime. However, the modern textile industry took birth in India in the
early nineteenth century when the first textile mill in the country was
established at fort gloster near Calcutta in 1818. The cotton textile industry,
however, made its real beginning in Bombay, in 1850s. The first cotton textile
mill of Bombay was established in 1854 by a Parsi cotton merchant then
engaged in overseas and internal trade. Indeed, the vast majority of the early
mills were the handiwork of Paris merchants engaged in yarn and cloth trade
at home and Chinese and African markets.
The first cotton mill in Ahmadabad, which was eventually to emerge as
a rival centre to Bombay, was established in 1861. The spread of the textile
industry to Ahmadabad was largely due to the Gujarati trading class.
The cotton textile industry made rapid progress in the second half of
the nineteenth century and by the end of the century there were 178 cotton
textile mills; but during the year 1900 the cotton textile industry was in bad
state due to the great famine and a number of mills of Bombay and
Ahmadabad were to be closed down for long periods.
The two world War and the Swadeshi movement provided great
stimulus to the Indian cotton textile industry. However, during the period 1922
to 1937 the industry was in doldrums and during this period a number of the
Bombay mills changed hands. The second World War, during which textile
import from Japan completely stopped, however, brought about an
unprecedented growth of this industry.
The number of mills increased from 178 with 4.05 lakh looms in 1901
to 249 mills with 13.35 lakh looms in 1921 and further to 396 mills with over
20 lakh looms in 1941. By 1945 there were 417 mills employing 5.10 lakh
workers.
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The cotton textile industry is rightly described as a Swadeshi industry
because it was developed with indigenous entrepreneurship and capital and
in the pre-independence era the Swadeshi movement stimulated demand for
Indian textile in the country.
The partition of the country at the time of independence affected the
cotton textile industry also. The Indian union got 409 out of the 423 textiles
mills of the undivided India. 14 mills and 22 per cent of the land under cotton
cultivation went to Pakistan. Some mills were closed down for some time. For
a number of years since independence, Indian mills had to import cotton from
Pakistan and other countries.
After independence, the cotton textile industry made rapid strides
under the Plans. Between 1951 and 1982 the total number of spindles
doubled from 11 million to 22 million. It increased further to well over 26
million by 1989-90.
PRESENT POSITION OF INDIAN TEXTILE INDUSTRY
The Indian textile industry contributes about 14 per cent to industrial
production, 4 per cent to the country's gross domestic product (GDP) and 17
per cent to the country’s export earnings, according to the Annual Report
2009-10 of the Ministry of Textiles.
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It provides direct employment to over 35 million people and is the
second largest provider of employment after agriculture.
According to the Ministry of Textiles, the cumulative production of cloth
during April’09- March’10 has increased by 8.3 per cent as compared to the
corresponding period of the previous year.
Moreover, total textile exports have increased to US$ 18.6 billion
during April’09- January’10, from US$ 17.7 billion during the corresponding
period of the previous year, registering an increase of 4.95 per cent in rupee
terms. Further, the share of textile exports in total exports has increased to
12.36 per cent during April’09-January’10, according to the Ministry of
Textiles.
As per the Index of Industrial Production (IIP) data released by the
Central Statistical Organisation (CSO), cotton textiles has registered a growth
of 5.5 per cent during April- March 2009-10, while wool, silk and man-made
fibre textiles have registered a growth of 8.2 per cent while textile products
including wearing apparel have registered a growth of 8.5 per cent.
INDIAS MAJOR COMPETITIORS IN THE WORLD
To understand Indias position among other textile producing the
industry contributes 9% of GDP and 35% of foreign exchange earnings, Indias
share in global exports is only 3% compared to Chinas 13.75% percent. In
addition to China, other developing countries are emerging as serious
competitive threats to India. Looking at export shares, Korea (6%) and Taiwan
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(5.5%) are ahead of India, while Turkey (2.9%) has already caught up and
others like Thailand (2.3%) and Indonesia (2%) are not much further behind.
The reason for this development is the fact that India lags behind these
countries in investment levels, technology, quality and logistics. If India were
competitive in some key segments it could serve as a basis for building a
modern industry, but there is no evidence of such signs, except to some
extent in the spinning industry
PROBLEM FACED BY THE TEXTILE INDUSTRY IN INDIA
The cotton textile industry is reeling under manifold problems. The
major problems are the following:
Sickness:
Sickness is widespread in the cotton textile industry. After the
engineering industry, the cotton textile industry has the highest
incidence of sickness. As many as 125 sick units have been taken over
by the Central Government. Sickness is caused by various reasons.
Obsolescence:
The plant and machinery and technology employed by a number
of units are obsolete. The need today is to make the industry
technologically up-to-date rather than expand capacity as such. This
need was foreseen quite sometime back and schemes for
modernisation of textile industry had been introduced.
The soft loan scheme was introduced a few years back and
some units were able to take advantage of the scheme and modernise
their equipment. However, the problem has not been fully tackled and it
is of utmost importance that the whole industry is technologically
updated. Not many companies would be able to find resources
internally and will have to depend on financial institutions and other
sources.
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Government-Regulations;
Government regulations like the obligation to produced
controlled cloth are against the interest of the industry. During the last
two decades the excessive regulations exercised by the government
on the mill sector has promoted inefficiency in both production and
management. This has also resulted in a colossal waste of raw
materials and productive facilities. For example, the mills are not
allowed to use filament yarn in warp in order to protect the interest of
art silk and power loom sector which use this yarn to cater to the
affluent section of society.
Low Yield and Fluctuation of Cotton Output:
The cotton yield per hectare of land is very low in India. This
results in high cost and price. Further, being largely dependent on the
climatic factors, the total raw cotton production is subject to wide
fluctuation causing serious problems for the mills in respect of the
supply of this vital raw material.
Competition from Man-made Fibres:
One of the serious challenges facing the cotton textile industry is
the competition from the man-made fibres and synthetics. These
textures are gradually replacing cotton textiles.
This substitution has in fact been supported by a number of
people on the ground that it is not possible to increase substantially the
raw cotton production without affecting other crops particularly food
crops.
Competition from other Countries:
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In the international market, India has been facing severe
competition from other countries like Taiwan, South Korea, China and
Japan. The high cost of production of the Indian industry is a serious
adverse factor.
Labour Problems:
The cotton textile industry is frequently plagued by labour
problems. The very long strike of the textile workers of Bombay caused
losses amounting to millions of rupees not only to the workers and
industry but also to the nation in terms of excise and other taxes and
exports.
Accumulation of Stock:
At times the industry faces the problems of very low off take of
stocks resulting in accumulation of huge stocks. The situation leads to
price cuts and the like leading to loss or low profits.
Miscellaneous:
The industry faces a number of other problems like power cuts,
infrastructural problems, lack of finance, exorbitant rise in raw material
prices and production costs etc.
SWOT ANALYSIS OF INDIAN TEXTILE INDUSTRY
Strengths:
Indian Textile Industry is an Independent & Self-Reliant industry.
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Abundant Raw Material availability that helps industry to control
costs and reduces the lead-time across the operation.
Availability of Low Cost and Skilled Manpower provides
competitive advantage to industry.
Availability of large varieties of cotton fiber and has a fast
growing synthetic fibre industry.
India has great advantage in Spinning Sector and has a
presence in all process of operation and value chain.
India is one of the largest exporters of Yarn in international
market and contributes around 25% share of the global trade in
Cotton Yarn.
The Apparel Industry is one of largest foreign revenue
contributor and holds 12% of the country’s total export.
Industry has large and diversified segments that provide wide
variety of products.
Growing Economy and Potential Domestic and International
Market.
Industry has Manufacturing Flexibility that helps to increase the
productivity.
Weaknesses:
Indian Textile Industry is highly Fragmented Industry.
Industry is highly dependent on Cotton.
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Lower Productivity in various segments.
There is Declining in Mill Segment.
Lack of Technological Development that affect the productivity
and other activities in whole value chain.
Infrastructural Bottlenecks and Efficiency such as, Transaction
Time at Ports and transportation Time.
Unfavourable labour Laws.
Lack of Trade Membership, which restrict to tap other potential
market.
Lacking to generate Economies of Scale.
Higher Indirect Taxes, Power and Interest Rates.
Opportunities:
Growth rate of Domestic Textile Industry is 6-8% per annum.
Large, Potential Domestic and International Market.
Product development and Diversification to cater global needs.
Elimination of Quota Restriction leads to greater Market
Development.
Market is gradually shifting towards Branded Readymade
Garment.
Increased Disposable Income and Purchasing Power of Indian
Customer opens New Market Development.
Emerging Retail Industry and Malls provide huge opportunities
for the Apparel, Handicraft and other segments of the industry.
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Threats:
Competition from other developing countries, especially China.
Continuous Quality Improvement is need of the hour as there
are different demand patterns all over the world.
Elimination of Quota system will lead to fluctuations in Export
Demand.
Threat for Traditional Market for Power loom and Handloom
Products and forcing them for product diversification.
Geographical Disadvantages.
(2) INTRODUCTION TO THE ORGANIZATION :-
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Established in 1989, The Banswara unit is the only one of its kind in
India and the Company's largest manufacturing facility. The unit has the
capabilities to produce spun gray yarn out of any kind of fiber and blend it with
synthetic, regenerated cellulosic, natural, protein and cotton fiber.
The Banswara Unit has the exclusive rights for
spinning Tencel Fiber into yarn in India and is a
modern textile-spinning unit employing state-of-
the-art technology from Switzerland, Germany,
UK, Italy and Korea.
The unit's strength is its new product
development. The unit can and does
manufacture any yarn delivering it in accordance with the customer's
deadlines. It is a 100% Grey Yarn Spinning unit producing Cotton blended
gray yarns and Polyester fibers. The unit has recently been expanded to
strengthen its product portfolio and giving it a greater product mix.
Raw Material Purchase
POLYESTER RELIANCEVISCOSE GRASIMCOTTON GUJARAT, RAJASTHAN, M.P., MAHARASTRAACRYLIC PRASUPATI
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Products
The Banswara Unit manufactures the following product range: Grey Yarn Specialty YarnFunctional YarnBrand SpecialtiesRegular Products Cotton 100%
Quality
The Banswara Unit covering new set of instruments to acquire ISO
accreditation in 1994. It also received the prestigious IS/ISO 9001:2000
Quality Management System Certification in 2002.
Infrastructure
The unit located 170 kms from Udaipur, Rajasthan is spread over 125
acres. Over 2,000 engineers, technicians and other skilled employees staff
the unit.
Some technical information and capabilities of the plant are given below:
Production Capacity -Size of the unit 380300 in sq. meters (Total Land
Area)
Manpower employed Skilled - 2000 nos.,
Semi Skilled - 305 nos
No. Of spindles – 87792
Yarn - 32850 MT / Annum
ORGANISATION STRUCTURE
CHAIRMAN - EMERITUS
CHAIRMAN
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VICE CHAIRMAN & MANAGING DIRECTOR
JOINT M.D.
EXECUTIVE DIRECTOR
COO
GENERAL MANAGERCOMI.
GENERAL MANAGER
ENGG
GENERAL MANAGER
NPD
GENERAL MANAGER
TECH.
DGM HRD
SR. MANAGER
P&A&L
SR. MANAGER
PROD.
SR. MANAGER
SPNG
SR.MGR MGR DS.MASTER MGR DY.MGR DSM SR.ENG
DY.MGR DY.MGR SR.OFFI.NFD SR.MGR ASTT.MGR ASTT.MGR FM
ASTT. MGR
ENGINEER SHIFT OFFICER
ASTT. MGR
SR.LABOUR OFFICER
SHIFT OFFICER
F.SUP.
SR.ASTT. SR.SUP. SHIFT OFFICER
LABOUR OFFICER
ASSTT. SUPERVISOR
PRODUCTION PROCEDURE :-
Production of yarn follows the following procedure:
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Different constituent such as cotton, polyester, viscose, acrylic etc. forms
yarn.
For polyester or viscose yarn both constituents are mixed in a definite ratio.
Fiber could be painted by spraying colors.
1) BLOW ROOM LINE:
It is machine that works for formation of lap. It is like a mattress of raw
material i.e. polyester/viscose or cotton. After lap formation it is wounded
around lap bar.
In RSWM, Lakshmi Rieter & Trutzschler have launched the machine. It
uses high load motor for 960 rpm of 2 kW.
2) CARDING:
After lap formation sliver is formed. For it carding machine is used.
Sliver is very thick and loose type thread. The sliver is stored in drums.
There is a sensor, which sense the broken of the sliver and after breaking it is
join by the worker. The machine is automatically stopped after breaking of the
slider.
In RSWM LR (Lakshmi Rieter) this process is also remove the dust
particles from the sliver. It used a pulley of M-8/1006.
3) DRAWING:
In this sliver is made thicker by combing 8 or 16 slivers together to form
a single sliver. It produces evenness in sliver. Vouk and LR have launched it
is RSWM.
In this the air pressure is applied on the sliver. In this process the material is
passed through the machine at two times. In which the first material is known
as breaker and the other one is none as finisher.
This process is also called as Draw Frame.
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4) SPEED FRAME:
The sliver from the draw frame is thread with fewer diameters than
sliver. It is used for rowing formation. It is wounded on bobbin. This bobbin
is known as S/F. Lakshmi Rieter has launched it in RSWM. The speed of
speed frame machine is 1100spm. There are minimum 4 speed frames in
each unit.
5) RING FRAME:
This machine is used for ultimate formation of yarn. This yarn is
wounded on small bobbins. This ring frame is connected with a
communication system called ring data and its speed is controlled by
spinmax.
There is a LED and photo detector, which senses the any breakage of
the yarn. The LED and photo detector is placed on the both ends of the
machine. It is automatically stopped if any yarn is broken.
The yarn made has a particular count. The roller to the drafting the
rowing does this work. They give the twisting in the yarn with the help of ring
and traveler.
The thickness of the yarn is depending on the count. If the count is
more (FINE) the yarn is thin and if the count is less closing (COARSE) the
yarn is thick. LR has launched it is RSWM.
6) AUTOCONER:
The function of this machine is to wind yarn from bobbin to cone. With
the help of splicing the yarn is combined together from the different bobbin.
The splicing procedure is carried by air pressure which of two types: (1) Wet
splicing (2) Dry splicing. The yarn is a pass through an electronics gage,
which major any type of fault in the yarn and remove the fault by the worker.
It has three models:
(a) 138-conventional machines.(b) 238-middle edge model. (c) 338-electronically operated Sthalaftorft has launched it in RSWM.
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7) CHEESE WINDER:
In this machine two or more than two yarn are combined together on
the cheese. So this process is known as cheese winding. It only combines
not produce any twist. Texttool, has launched it in RSWM.
8) T.F.O. (two for one twister):
As it indicate in this machine two yarn are combined as well as twisted.
These processes minimize the unwanted knots in the yarn.
Star Volkamann VTS-07 has launched it is RSWM.
9) DOUBLING MACHINE:
It is used for twisting two yarn found from cheese winder. This
machine works same as ring frame machine and the yarn is again wound on
the bobbin.
10) WINDING:
The yarn from the doubling process is against wounded on the cone by
which the weight and length of the yarn is same.
11) PACKAGING:
After through checking all the cones are packed in cartoons or bags as
per process and sent to the yarn go-down.
In packing department relative humidity is quite high viz. 90% to provide
adequate moisture to the yarn. Although it will be increase the yarn package.
There are two types of packages:
Domestic use
Export oriented
There are two types of packing:
Pilot packing.
Cartoon packing
29
Checking
A Checking procedure is followed to ensure that material should not be
mixed with another. For this purpose cones on a trolley are checked by ultra
violet light in a dark chamber. If the material is mixed or any other variations
like count/blend etc. are there it will be reflected by shade variation in the
cones and under UV lamp, the reflectance would be different for normal and
defective portion by virtue of which we can attest the cones.
INSPECTIO BY THE PACKING INVESTIGATOR
Each cone and final yarn shall be inspected in packing department for
its quality before packing.
Packing investigator shall segregate4 the cone having defective yam,
wrong label.
The weighting man shall check net yam content to be packed in a
cartoon bag before packing and adjust the weight as tolerance limit.
30
Flow chart of spinning, finishing & packaging
departments
31
Fiber Godown
Mixing & Welding
Blow Room
Carding
Draw FrameFirst Time
Draw FrameSecond Time
Speed Frame
Ring Frame
Autoconer
Packing
Finished Goods in Godown
Market
Sliver Lap. Ribbon
Comber
Cheese Winding
T.F.O. Doubling
Winding
Foundations that inspire
"To me, the LNJ Bhilwara Group is not a business house, I see it as an
institution that is committed to seeking excellence."
L.N.Jhunjhunwala
Chairman Emeritus
MISSION AND VISION
MISSION
“To continuously grow on sustainable basis and be a major, innovative,
profitable and the most admired textile manufacturer in Asia”.
VISION
“Our vision is to forge ahead into the new millennium with an immediate sense
of purpose and to be seen as the undisputed leader, fully equipped to deliver
the best, across the diverse spectra of our many businesses, fuelled by a
commitment to invest in plants, machinery, processes and, most importantly,
our people - Team Bhilwara: all towards satisfying and fulfilling our customer’s
needs in today’s global environments.”
Ravi Jhunjhunwala
Group Chairman
32
33
34
INTRODUCTION OF LNJ BHILWARA GROUP
The LNJ Bhilwara Group, founded in 1961, has today grown into a
strong global presence worth Rs. 2049 crores. The Group has been nurtured
into a successful growth track by the able guidance of the Founder and
Chairman-Emeritus, Mr. L. N. Jhunjhunwala. Currently, the LNJ Bhilwara
Group stands as one of the largest firms on the corporate horizon in India with
over 20,000 employees and 21 production units positioned at strategic
locations across the country. The Group’s export earnings comprise of 46% of
the Group’s turnover.
The LNJ Bhilwara Group is a well-diversified conglomerate. It has been
actively seeking growth and profitability by investing in a variety of
systematically identified businesses making it a multi-product conglomerate
with interests in a range of industries such as textiles, graphite electrodes,
power generation, power engineering consultancy services, steel and IT
enabled services.
Textiles
The pioneering textile division of the Group is not only a key player in
the industry but also has many firsts to its credit. The textile division has the
sole distinction of producing a unique fire retardant yarn called Trevira CS
(now known as Lenzing, Austria). It is also the sole licensee for the highly
specialized yarn called Tencel. The Group has time and again been
acknowledged for its world-class quality products in the domestic market such
as Mayur Suitings, BSL Suitings, La Italia Fashions and Geoffrey Hammond
superfine suitings. At the same time, their services to several leading global
brands for knitted garments have been recognized with the units garnering top
export awards in different fields for several years in a row.
35
Graphite Electrodes
The LNJ Bhilwara Group also has the largest integrated graphite
electrodes manufacturing plant in South-east Asia with a reputed clientele
comprising of major steel plants in the world. Graphite exports constitute 70%
of total sales volume. An evidence of their success can be seen in the fact
that HEG, an integral part of the Group, is all set to undertake a Rs. 450 crore
expansion plan to tap opportunities in the export market. The expansion of the
Mandideep plant would double the capacity from 30,000 TPA to 60,000 TPA.
Power Sector
Following the success of its earlier hydro-electric power project of 15
MW at Tawa Nagar (MP) in 1997, the Group has commissioned, India’s first
IPP Hydro-electric Malana Power Project of 86 MW in a record time of 30
months at Kullu (HP), in July, 2001 and is set to commence work on 200 MW
Allain-Duhangan Hydro Electric Project at Manali (HP).
Little wonder then, that the LNJ Bhilwara Group of companies have
been awarded IS/ISO 9001:2000 & ISO 14001 certification for setting
exemplary standards in quality.
36
LNJ BHILWARA GROUP IN THE DIFFERENT
SECTORS
The LNJ Bhilwara Group has come a long way from its humble
beginnings in 1971 and has grown successively into a strong conglomerate
that continues to spread its wings into highly competitive domains ranging
from textiles to power to IT-enabled services.
TEXTILES
The LNJ Bhilwara Group has been in the business of clothing people
around the world with the following companies:
Rajasthan Spinning & Weaving Mills Ltd.
Maral Overseas Limited
Bhilwara Melba De Witte Pvt. Ltd.
BSL Ltd
Bhilwara Spinners Ltd.
Maral Overseas Ltd., a part of the LNJ Bhilwara Group, a
conglomerate with a global presence. Maral is the country’s largest ‘Vertically-
Integrated’ knitwear company located in the heart of India’s cotton producing
region near Indore, Madhya Pradesh.
Its other units are located in Jammu and Noida (NCR-Delhi). Maral is
India’s first 100% Export –Oriented-Unit to get the prestigious ISO
certification. Maral has been accorded a ‘Trading House’ status, and is an
37
internationally preferred manufacturer and supplier of Cotton Yarn, Knitted
Fabrics, Knitwears and Sweaters. Maral has been accredited by Marks &
Spencer.
Maral has stringent quality checks at every stage of its production.
Maral is equipped with state-of-the-art technology and full captive power back
up at all units. Maral is committed to maintain eco-friendly environmental
standards throughout its operations. Maral has won several prestigious
awards and is recognized for quality, safety and standards.
Maral caters to many international customers scattered in major global
textile consuming markets like USA, Europe, Japan etc. Maral is always
committed to its customers for quality and service.
Bhilwara Melba De Witte Pvt. Ltd. (BMD) was established in 1998. It
is a joint venture of LNJ Bhilwara Group and De Witte Lietaer, a part of
Gamma Holding of Belgium, to manufacture high performance specialized
furnishing fabrics. BMD has its manufacturing plant at Banswara in Rajasthan.
It has fully integrated state-of-the-art facility for automotive textiles, which is
equipped with Air-texturing, yarn dyeing, warping, weaving, warp & circular
knitting, processing and lamination.
BMD has a production capacity of 1000 MT
per annum of Air-texturised yarn and 3.0
million Linear Meters of fabrics. Today, the
company enjoys an accreditation of IS/TS
16949 certification and supplies its products to
leading automotive companies in India.
38
The wide product range of BMD covers like automotive furnishing
fabrics, Decorative Furnishing Fabric, Contract Furnishing, Flame Retardant
Fabric, Technical Textiles and Air Texturised yarn-Grey & Dyed.
BSL Ltd. established in 1971 at Bhilwara, Rajasthan. Today, BSL has
emerged as a strong global player producing over 12 million meters of fabric
every year. BSL is equipped with state-of-the-art technology. Right from raw
material sourcing to product finishing, meticulous attention is paid to detail at
every stage of production.
The emphasis is to achieve shorter lead times and
greater efficiency by following integrated yarn
preparation, spinning, weaving and finishing
processes. BSL offers a discerning range of
Polyester / Viscose blended fabrics, wool and wool
blended fabrics.
BSL Yarn spun from the finest Australian Merino wool incorporating
latest manufacturing systems and technologies, which enable BSL to spin
yarn up to 2/100 NM, popularly known as Super 140s.
Specialized processing machines provide the fabric its final make up,
shade, depth, finish and overall appearance. In line with the latest
international trends, BSL has also developed multi functional and specialized
fabrics, like stay fresh, wrinkle free, stain and water repellent, anti radiation.
Keeping up with the emerging trend of branded ready-to-wear, BSL has
launched the La Italia & Louis Burton brands of ready-made garments. The
company is setting up a P/v spinning unit of 8448 spindles mainly to cater to
its yarn requirement for export of fabrics.
39
Bhilwara Spinners Ltd. (Bhilspin) established in 1980 manufacturers
Synthetic Blended Grey and Dyed yarns at its manufacturing unit at Bhilwara
in Rajasthan. Today, the company has 30,000 spindles to manufacture
12,000 MT per annum.
Bhilspin has been accorded " Export House" status and conferred
"Niryat Shree for its export performance. Bhilspin also enjoys IS/ISO
9001:2000 certification.
GRAPHITE ELECTRODES
A premier company of the LNJ Bhilwara Group, is India’s leading Graphite
Electrodes manufacturer and an established
global player in the sector. It is the single
largest integrated Graphite Electrodes
manufacturing facility in South Asia, South
East Asia and the Middle East. HEG is also
the only one of its kind in the region to process
the sophisticated UHP (Ultra High Power) Electrodes with technology from
SERS – a subsidiary of Pechinery, France.
40
STEELS
HEG Ltd. had set up a steel manufacturing plant
with an annual production capacity of 60000 TPA
consisting of two modules of 30000 TPA each.
Each Kiln is of 40-meter length and 2.6 meter
effective dia with an output of 100-105 tons per
day. Temperature inside the kiln during the
process ranges from 600oC to 950oC. This unit was commissioned and put in
to commercial production during Feb 1992. The coal based process
technology was imported from Steel India Ltd, Hyderabad that is also known
as Lurgi process conceived in 1960 for production of High Grade Direct
Reduced Iron (DRI). Power to manufacture billets through Induction Furnace
and Continuous Casting Machine. Company will soon be producing 1 lac Ton
of Steel.
POWER GENERATION
Malana hydroelectric project is a run-of-the-river scheme
implemented by the Malana Power Company Ltd, an LNJ Bhilwara group
company, on the river Malana in the Kullu district of Himachal Pradesh.
41
The construction of the 86 MW project was started in January 1999 and it was
commissioned in a record period of 30 months at a total cost of Rs 332
Crores.
By successful commissioning in a record time &
at a cost of less than Rs. 40 million per MW the
Malana hydroelectric project has exploded the
myths surrounding hydel power.
Malana hydroelectric project is an exemplary
and path breaking achievement in the field of
hydropower generation in the country.
The 192 MW Allain Duhangan hydroelectric project is a run-of-the-river
scheme being implemented by the AD Hydro Power Ltd, an LNJ Bhilwara
group company, on the rivers Allain & Duhangan in the Kullu district of
Himachal Pradesh and is scheduled to be completed in 2008.The project is
being financed by the International Finance Corporation and is designed to
generate 821 million units per annum at an estimated cost of Rs. 922 Crores.
POWER ENGINEERING CONSULTANCY
Indo Canadian Consultancy Services Ltd. (ICCS) is a joint venture
company incorporated in 1995 by LNJ Bhilwara Group and RSW, Canada.
RSW is a Consultancy engineering firm providing services for multi
disciplinary projects.
The company was founded in 1970 by a group of senior engineers
drawn from large Canadian Consulting organizations and public utilities.
42
ICCS is currently offering services to over 25 projects across the
country in the states of Himachal Pradesh, Uttaranchal, West Bengal,
Karnataka, Sikkim, Madhya Pradesh, Chattisgarh, Arunachal Pradesh and
Maharashtra.
ICCS has successfully designed and engineered 15MW Tawa
hydropower project and 86 MW Malana Hydro Power Project. Other
achievements include Design & Engineering services for 3 MW Vajra HEP, 10
MW Bhandardhara HEP, 10 MW Gangrel HEP and 4.5 MW Baragran HEP.
ICCS is also providing services for Detailed Design & Engineering for
100 MW Chuzachen HEP in Sikkim and 24 MW Balason HEP in West Bengal,
Detailed Project Report for 100 MW Rangit-IV HEP in Sikkim, Detailed Project
Report for 100 MW Tidong HEP, 60 MW Harsar HEP and 45 MW Bharmour
HEP in Himachal Pradesh, Detailed Project Report for 50 MW Hanol Tiuni
HEP & 24 MW Bhilangana-III HEP In Uttaranchal.
In addition to Hydro Projects, ICCS is also providing assistance in the
implementation of Wind Power Projects, Captive Thermal Plant, Transmission
Lines & Substations.
43
Nationwide Network
RSWM Ltd
Gulabpura Synthetic, Regenerated Cellulosic, Blended, Dyed Yarn & Fabric
Banswara Synthetic, Regenerated Cellulosic & Cotton-Blended Grey Yarn
Mandpam Cotton Mélange Yarn, Cotton-Blended Mélange & Dyed Yarn
RishabhdevSynthetic, Blended & Grey Yarn
RingasSynthetic & Blended Dyed Yarn
BangaloreApparels
Mordi Process House
44
(Banswara)
HEG Ltd. Mandideep Graphite Electrodes Durg SteelDurg Waste Heat Recovery Power Tawa Hydro Electric Power
Maral Overseas Ltd.
Maral SarovarCotton Yarn, Cotton-Knitted (100% EOU) Fabric & Cotton Knitwear
Jammu Cotton-Knitted Fabric, Cotton Knitwear & Sweaters Noida Knit wears
BSL Ltd.
Mandpam: Yarn, Worsted & Synthetic Fabric, Readymade Garments & Accessories
Bhilwara Spinners Ltd.
BhilwaraSynthetic, Blended Grey & Dyed yarn
Bhilwara Melba De Witte Pvt. Ltd. Mordi (Banswara) Specialized Automotive Fabric, Furnishing Fabric
Bhilwara Processors Ltd.
Mandpam Processing of Synthetic & Worsted Fabric, Tops Fiber Dyeing
Malana Power Company Ltd.
MalanaHydro Electric Power (Kullu)
AD Hydro Power Ltd.
ManaliAllian-Duhangan Hydro Electric Power
45
Indo-Canadian Consultancy Services Ltd.
NoidaPower Engineering Services
Bhilwara Scribe Pvt. Ltd.
BhopalIT-Enabled Services
Corporate Office
NoidaNational Capital Region and Delhi
Regional / Marketing OfficesMumbai KolkataBangaloreDelhi Ludhiana
AWARDS
The LNJ Bhilwara Group not only has several firsts to its credit
but also recognition for its commitment to quality and excellence with
several national awards and certifications.
Graphite Electrode
HEG is the winner of CAPEXIL Highest Export Award for Graphite
Electrodes for the last 18 consecutive years.
HEG bagged "Rajiv Gandhi National Quality Commendation" and
‘National Export’ Awards.
HEG- Graphite Division bagged National Export Award.
46
HEG bagged 3 National Awards for Quality Circles.
Textiles
RSWM is the winner of SRTEPC Highest Export Award for
polyester/viscose yarn exports for the last several consecutive years,
which includes two gold and one bronze in March 2005.
Maral is India’s fully integrated 100% EOU cotton knitwear unit and
winner of TEXPROCIL Silver trophy in 100% EOU / EPZ category.
Maral has also been awarded Silver Trophy by AEPC.
Maral is the recipient of Rajiv Gandhi National Quality Award.
Maral bagged "Greentech Safety Award".
RSWM, Rishabhdev unit bagged National Export Award. Rishabhdev
unit also bagged SRTEPC Excellence award for highest production in
export of 100% Polyester spun yarn.
BSL received the "National Certificate of Merit" for outstanding export
performance.
Bhilwara Spinners has been accorded the prestigious “Niryat Shree”-
Certificate of Excellence for Outstanding export performance.
Power
Malana Power bagged “ Greentech Environment Excellence’ Award.
INTERNATIONAL PARTNERS & ASSOCIATES
The LNJ Bhilawara Group, in its quest for excellence and growth
has partnered with the following international companies:
Stat Kraft Norfund Invest Ltd., Norway-Setting up a 192 MW
Hydroelectric Project at Manali.
RSW International, Canada -Power Consultancy Services.
International Finance Corporation, Washington -Equity holders in
AD Hydro Power Project
De Witte Lietaer, Belgium -Specialized Automotive Furnishing Fabrics
Tencel, UK (now Lenzing, Austria)-Tencel Yarn Spinning
47
Hoechst’ (now Trevira CS), Germany-Flame Retardant Yarns &
Fabrics
eScribe Inc., USA -IT Enabled Services
Enercon (India) a subsidiary of Enercon (Germany)-Setting up Wind
Energy Project
(3) RESEARCH METHODOLOGY:-
3.1 TITLE OF THE STUDY:-
Analysis of working capital management
3.2 Duration of the project:-
45 days from 21st June to 5th of august
3.3 OBJECTIVES OF STUDY:-
While pursuing MBA degree we are required to go for a practical
training in order to have some work experience, to learn the process and
procedure, to understand the work process and to expose our creativity,
48
keeping this perspective in mind, offered for training in RSWM, Banswara an
organization of LNJ Group.
The objectives of my study are:
To analyze financial position of the organization to execute the routine
operations and meet for contingencies.
To study the working capital management of RSWM Ltd., Banswara.
To practically understand the concept of working capital studies in
academic session.
To study the Financing of it W.C. needs.
To study the trends & reasons for deviation.
3.4 Type of Research:-
EXPLORATORY RESEARCH.
3.5 Sample Size and method of selecting sample:-
Sample size is 100 people ,and the type of sample is Stratified Sampling.
3.6 SCOPE OF PROJECT:-
Scope of project is to determine the short-term debt paying capacity of
the firm through a financial analysis of Working capital. It tends to find out the
effectiveness in the management of Working capital at RSWM LTD.
For this purpose data were collected from the past financial statements
of the company.
49
Working capital is as import in business firm as blood in a human life.
Each and every business concern should have adequate funds to meet out
day-to-day expenses and to finance current assets, debtors, receivables and
inventories. Proper management of working capital is necessary to maintain
both liquidity and profitability.
The goal of working capital management is to manage the firm’s
current assets and current liabilities in such a way that a satisfactory level of
working capital is maintained. It is the process of planning and controlling the
level and mix of the current assets of the firm as well as financing these
assets.
“INTRODUCTION TO WORKING CAPITAL
MANAGEMENT”
Meaning:
Capital is the life and blood of a business organization Capital required
for a business can be classified under two main categories.
Kind of Working Capital
On the basis of concept On the basis of
time
Gross Net Fixed orTemporary or
Working working permanent Variable Capital capital Working Working
Capital capital
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Regular Reverse Special Season
Working Working Working W.C Capital Capital Capital
Long-term funds are required to create production facilities through
purchase of fixed assets such as plant and machinery, land and building,
furniture and fixtures etc. Investments in these assets are blocked on a
permanent or fixed basis and are called fixed capital.
Funds are also needed for short-term purposes for the purchase of raw
materials, payment of wages and other day-to-day expenses, etc. These
funds are known as Working Capital (WC). It refers to that part of firm’s
capital, which is required for financing short-term or current assets such, as
cash, marketable securities, debtors and inventories. Funds, thus, invested in
current asset keep revolving fast and are being constantly converted into cash
and this cash flow out again in exchange for other current assets. Hence it is
also known as revolving or circulating capital or short-term capital.
The need of WC arises due to the time gap between production and
realization of cash from sales. There is an operating cycle involved in the
sales and realization of cash. There are time gaps in purchase of raw
material and production, production and sales and realization of cash. Thus,
WC is needed to meet various expenses during these times.
A business undertaking requires funds for two purposes:
To create productive capacities through purchase of fixed assets etc.
and
To finance current assets required for day to day running of the
business.
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Working capital refers to the funds invested in current assets, i.e.,
investment in stock. Sundry debtors, cash and other current assets, Current
assets are essential to use fixed assets profitably.
For example: A machine cannot be used without raw material. The
investment on the purchase of raw material is identified as working capital.
52
CONCEPTS OF WORKIING CAPITAL
There are two concepts of working Capital
Gross Concept
Net Concept
GROSS WORKING CAPITAL:
Simply called as working capital, it refers to the firm’s investment in
current assets. Current assets are the assets, which can be converted into
cash within an accounting year (or operating cycle), and include cash, short-
term securities, debtors, bills receivables and stock (inventory).
NET WORKING CAPITAL (NWC)
NWC = Current Assets – Current Liabilities
Current liabilities are those claims of outsiders, which are expected to
mature for payment within an accounting year (or operating cycle) and include
creditors, bills payable and outstanding expenses.
Net working capital can be positive or negative. A positive net working
capital will arise when current assets exceed current liabilities. On the other
hand, negative working capital occurs when current liabilities are in excess of
current assets.
The gross working capital concept focuses attention on two aspects of
current assets management.
Optimum investment in current assets.
Financing of current assets.
The consideration of the level of investment in current assets should
avoid two danger points
1) Excessive investment.
2) Inadequate investment in current assets.
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Excessive investment in current assets should be avoided because it
impairs firm’s profitability, as idle investment earns nothing. On the other
hand, inadequate amount of working capital can threaten solvency of the firm
because of its inability to meet its current obligations.
Net working capital being the difference between current assets and
current liabilities is a qualitative concept.
It indicates the liquidity position of the firm and it suggests the extent to
which working capital needs may be financed by permanent sources of the
funds.
From the point of view of TIME working capital can be divided into two
categories:
1) Permanent working capital.
2) Temporary working capital.
Permanent working capital:
Refers to that minimum level of investment in the current asset that is
carried by the business at all times to carry out minimum level of its activities.
Since permanent working capital remains in the business on long-term basis,
it should be financed from long-term sources.
Temporary working capital:
Refers to that part of total working capital, which is required by a
business over and above permanent working capital. It is also called as
variable working capital. Since the volume of temporary working capital
keeps on fluctuating from time to time according to the business activities it
may be financed from short-term sources.
Working capital management policies have a great effect on the firm’s
Profitability.
Liquidity
Structural health.
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Gross working capital consists of cash, receivables and inventory. If a
firm has relatively high investment in these assets in comparison to a firm,
which is transacting the same volume of sale, it will have lower profitability in
comparison to the latter.
Therefore, a firm, which has high working capital turnover, will have
higher profitability. The current ratio and quick ratio indicate liquidity aspect of
the firm. If current assets are reduced beyond limit, the current and quick
ratio will have adversely affected leading the firm to poor liquidity.
Therefore, it is essential that a proper balance be struck between
profitability and liquidity. In fact profitability and liquidity are inversely related,
when one increases the other decreases. A firm having high liquidity will have
a lower profitability and vice versa.
Working capital management policies also have a great impact on the
structural health of the organization. If different components of working
capital are not properly balanced then in spite of the fact that current and
quick ratios may indicate satisfactory financial position in respect of the
liquidity of the firm. It may not in fact be as liquid as indicated by the current
and quick ratios.
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IMPORTANCE OF ADEQUATE WORKING CAPITAL
Proper management of working capital is very essential for the smooth
functioning of the business. Optimum utilization of fixed assets can only be
done when we have proper management of working capital working capital is
required for purchasing raw material in to finished, sales expenses,
distribution expenses etc.
Both excessive as well as inadequate working capital positions are
harmful from the firm’s point of view. Excessive working capital leads to idle
funds and company has to pay huge amount as interest and opportunity cost
for this idle fund. One the other hand, inadequate working capital not only
impairs firm’s profitability but also result in production interruption and
inefficiencies. So a firm should have adequate.
Working capital should be adequate for the following reasons:
1) Quick payment to suppliers.
2) Increase in debt capacity & goodwill.
3) Cash discount.
4) Easy availability of bank loans.
5) Exploitation of favorable opportunity.
6) Meeting unseen contingencies.
7) Distribution of adequate dividends.
Determinants of Working Capital
1) Nature & size of the business.
2) Production cycle.
3) Business cycle
4) Credit policy
5) Volume of sales.
6) Price level change
7) Profit level
8) Seasonal operation
9) Production policy.
10) Management’s ability.
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COMPONENTS OF WORKING CAPITAL
The main components of the Working Capital Management are as follows:
Receivable Management.
Cash Management
Inventory Management
Payables Management
RECEIVABLE MANAGEMENT:
Receivable management highlights the importance of account
receivable in the day-to-day operations of a business enterprise and the role
of receivable management in improving profitability and liquidity of an
enterprise. Various dimension of receivable management viz. Credit
Standards, Credit Analysis, Credit Terms and Collection Policies are included
in receivable management. The Average Collection Patterns are the methods
of monitoring accounts receivable. Account receivables represent the amount
due from its customers to whom the company has extended the credit.
57
CASH MANAGEMENT:
Cash the most liquid asset, is of vital importance to the daily operations
of the business firms. While the proportion of corporate assets held in the
form of cash is very small, often between 1% and 3%, its efficient
management is crucial to the solvency of the business because in a very
important sense cash is the focal point of fund flow in a business. In view of
its importance, it is generally referred to as the “life blood of a business
enterprise”.
The evidence suggests that the existing practices of cash inflows and
outflows predictions remain much to be desired. Concentration banking is the
most popular technique employed by the business forms to intensify cash
inflows. Usually the local sales office or a branch of the company performs
this function. The management at the head Office utilizes these funds on the
basis of daily collection reports.
As regards the control of cash outflows, firms have a tendency to defer
payment till the last moment. Funds are arranged only on the day cheques
are expected be presented by the payee and for the amount necessary to
honour the cheques. In the case of local payment, cheques are many times
handed over after the banking hours.
At RSWM cash management is essence; means it is the main
component of working capital management, all efforts are made to contain the
length of the operating cycle to a reasonable level. In particular, the company
has been able to reduce substantially the overall inventory levels through
proper vendor selection and development. What is more striking is the fact
that the company takes as much care of its suppliers as it does for its
customers. As a result the suppliers readily come forward to accommodate
any temporary delay in payments.
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INVENTORY MANAGEMENT:
Working Capital as net concept is defined as the difference between
current assets and current liabilities. Current assets being those assets that
are likely to be converted into liquidity within a year are time or so. These
include items like inventories of raw materials, semi manufactured articles or
work-in-progress and finished goods, accounts receivables handier or bills
receivables, bank balance and cash balance etc. Current liabilities are in
essence short-term liabilities, which have to be settled in a year’s time. These
include accounts payable or amount payable to suppliers of goods and
services for goods and services delivered on credit, bills payable, bank
overdraft etc. since inventories constitute a major item of current assets, the
management of inventories is crucial to successful working capital
management. Working capital requirements are influenced by inventory
holding – the period during which raw materials remains in store, during which
processing takes place and that during which finished goods lie in the
warehouse prior to sale. The level of inventory invested affects the total
investment in working capital. Thus, operating ratio of turnover or sales to
Working Capital are affected by it as well.
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PAYABLES MANAGEMENT:
A substantial part of purchases of goods and services in business are
on credit terms rather than against cash payment. White the supplier of
goods and services tends to perceive credit as a lever for enhancing sales or
as a form of non-price instrument of competition; the buyer tends to look upon
at as a loaning of goods or inventory. The supplier’s credit is referred to as
accounts payable, trade credit, trade acceptance, commercial draft or bills
payable depending on the nature of credit provided. The extend to which this
‘buy now, pay latter’ facility is provided will depend upon a variety of factors
such as the nature, quality and volume of items to be purchased, the
prevalent practices in the trade, the degree of competition and the financial
status of the parties concerned. Trade credit or payables constitute a major
segment of current liabilities in many business enterprises and they primarily
finance inventories, which form a major component of current assets in many
cases.
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WORKING CAPITAL FINANCING
After determining the level of working capital, a firm has to decide how
it is to be financed. Although long-term funds partly finance current assets
and provide the margin money for working capital, such working capitals are
virtually exclusively supported by short-term sources.
Funds available for a period of one year or less are called short-term
finance. In India, short-term funds are used to finance working capital.
The organization can go for various sources, which can be discussed below:
Spontaneous sources:
(a) Trade Credit: Trade credit refers to the credit that customers get
from
supplier of goods in the normal course of business
(b) Outstanding The company is able to get the benefit of the
services
Expenses: without paying for the same for immediately, thus
getting the finance for working capital purposes.
This may apply to salaries wages, telephone
expenses etc.
Inter-corporate Deposits: It indicates the amount of funds borrowed
by one company
from another company, usually both the
companies being under the same management
Commercial Papers: It is an unsecured promissory note issued at
discount.
Banks:
(a) Non-Fund Based Lending
(1) Bank Guarantees
(2) Letter of Credit
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(b) Fund-Based Lending
(1) Loan
(2) Cash credit
(3) Bills Purchased/discounted
(4) Working Capital Term Loans
(5) Packing Credit.
MODE OF SECURITY
Banks provide credit on the basis of the following modes of security.
1) HYPOTHECATION:
Under this mode of security, the banks provide credit to borrowers
against the security of movable property, usually inventory of goods.
The goods hypothecated, however continues to be in the possession of
the owner of these goods (i.e. borrowers).
2) PLEDGE:
Pledge, as a mode of security, is different from hypothecation in that, in
the former unlike the later, the goods that are offered as security are
transferred to the physical position of the lender.
3) LIEN:
The term Lien refers to the right of a party to retain goods belonging to
another party until the debt due to him is paid.
Lien can be of two types:
Particular Lien: Particular Lien is of a right to retain goods until a claim
pertaining to these goods is fully paid.
General Lien: This Lien can be applied till all due of the claimant are
paid. Banks enjoy general lien.
4) MORTGAGE:
62
It is the transfer of interest in specific immovable property for securing
the payment of money advanced.
5) CHARGE:
Where immovable property of one person is by the act of properties or
by the operation of the law made security for the payment of money to
another and the transaction does not amount to mortgage, the latter
person is said to have a charge on the property and the provision of
simple mortgage will apply to such a charge.
At RSWM security given to the banks is in the form of Hypothecation
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Working Capital Operating Cycle:-
The WC Cycle starts with the purchase of raw materials and ends with
the realization of cash from the sale of finished products. It plays an important
part in determining WC requirements: longer the period of this cycle, larger is
the requirement of WC.
Various phase involved in WC operating cycle are as follows:
1) Acquisition of resources: It companies of -
Purchase of raw materials: Payment of raw material to raw-material
suppliers after the credit period allowed by them.
2) Manufacture of the product:
Conversion of raw material to work in progress.
Conversion of work in progress to finished goods.
3) Sale of Finished goods.
4) Realization of cash from debtors after the credit period allowed to
them.
Operating Cycle
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Cash
Receivables + Cost Raw Material + Cost
Finished Goods + Cost
Stock in Process + Cost
1) Accounts Payable period: This is the period from the day of
acquisition of raw material to the payment of raw materials. In other it
is the credit period allowed to the organization by raw material
suppliers.
2) Cash Cycle: The period from the day of payment for raw material
purchased till the realization of cash against sales.
Cash Cycle = WC Operating Cycle – Accounts Payable Period
3) Inventory Period: The period is beginning from the day of receipt of
raw materials in the factory till the day of dispatch of finished goods.
4) Accounts Receivable Period: The period beginning from day of
dispatch of finished goods to the buyer and ending on the day of
realization of cash against sales.
5) Operating Cycle: The time that elapses between the purchase of raw
materials and the collection of cash for sales is referred to as operating
cycle.
Operating Cycle = Inventory Period + Accounts Receivable Period.
OPERATING CYCLE CONCEPTS
There are two concepts of operating cycle.
1) Gross operating cycle period
2) Net operating period.
GROSS OPERATING CYCLE PERIOD:
The successive segments of the operating cycle are:
1) Raw material storage period.
2) Conversion period.
3) Finished goods storage period.
4) Average Collection period.
The total duration of the entire segment mentioned above is known as
gross operating period.
65
CASE-I
In case the company sells its products for cash then the segment of
average collection period will disappear from the gross operating cycle period
and to that extent the total duration of the cycle gets reduced.
CASH-II
In case advance payments are to be made for procuring materials, the
operating cycle period increases.
NET OPERATING CYCLE PERIOD:
When the average payment period of the company to its suppliers is
deducted from the gross operating cycle period the resultant period is called
net operating cycle period or simply operating cycle.
It becomes obvious that the shorter the duration of operating cycle
period, the faster will be the transformation of current assets into cash.
The operating cycle approach is quite useful in:
Managing
Controlling and
Forecasting working capital.
66
EVENTS OF OPERATING CYCLE
The operating cycle (working capital cycle) consists of the following event, which continues through out the life of business.
1) Conversion of cash into raw materials. 2) Conversion of raw materials into work-in-progress. 3) Conversion of work-in-progress into finished stock.4) Conversion of finished stocks into accounts receivables through sale
and 5) Conversion of accounts receivables into cash.
The duration of the operating cycle for the purpose of estimating working capital is equal to the sum of the duration of each of above said events, less the credit period allowed by the suppliers.
In the form of an equation, the operating cycle process can be expressed as follows: Operating cycle = R + W + F + D – C Where,R = Raw material and stores storage period. W = Work-in-Progress period.F = Finished goods storage period.D = Debtors collection period C = Credit payment period.
The various components of operating cycle may be calculated as:
Raw Material = Average stock of raw material
Average cost of production per day
Work-in Progress holding period = Average W-I-P inventory Average cost of production per day
Finished goods storage period = Average stock of finished goods Average cost of goods sold per day
Debtors collection period = Average book debts Average sales per day
Credit payment period = Average trade creditors Average purchase per day
67
3.7 LIMITATION OF THE STUDY
This study was restricted to RSWM Ltd. (Banswara Unit) only and
therefore, the result of this study cannot be generalized to other parts
of the units.
The study was relayed upon the information given by the respondents
at the time of interview.
Due to confidentially of certain information all the details could not be
obtained from the company.
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(4) FACTS & FINDINGS :-
SWM LTD. BANSWARA (RAJ.)
Assessment of Working Capital(Rs. In Lakhs)
Particulars 2005-2006 2006-2007 2007-08Current Assets: - Inventory 4605.62 4868.82 4487.42Sundry Debtors 2372.83 2279.98 2788.93Cash and Bank Balances 75.98 14.04 17.23Other Current Assets 1092.39 935.56 995.72Loans & Advances 279.18 385.05 196.10(A) Total Current Assets 8426 8483.45 8485.42
Current Liabilities 959.99 1170.12 981.17Provision 72.72 0.00 76.22Working Capital Loans 4636.70 3480.89 4506.13(B) Total Current Liabilities 5669.41 4651.01 5563.52
(A-B) Net Increase/ Decrease in Working Capital
2756.59 4865.91 2921.9
Findings:
The net working capital is increasing every year. It shows that every
year increase in current assets is greater than increase in current
liabilities and it shows that the company has sufficient fund to meet its
short-term obligation as they become due.
In year 2006-2007 current assets and current liabilities both are
decreased but still net working capital was increased, this is due to the
% change in C.A. is less then % change in C.L.
There are no provisions in 2006-2007 and cash in hand & bank
balance is decreasing every year.
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(5) ANALYSIS AND INTERPRETATION:-
RATIO ANALYSIS
The importance of working capital management cannot be over-
emphasized in view of the time and energy spent by company management
on such decision. For any future corrective action analysis of past
performance of the firm on the working capital front is essential. This requires
knowledge and use of certain tools and techniques that may help
management to spot out problem areas for future action. Among many such
analytical tools. Ratio analysis is a simple but effective tool available to the
management.
Working capital management, is concerned with maintaining an
adequate amount of working capital, proper balance of current assets vis-à-
vis non-current assets in the asset structure and a reasonable mix of short
term and long-term sources in the financial structure of the firm. Ratio
analysis can be used by management as a tool to verify the level and
composition of working capital held by management in the business as
against its operations, the extent of liquidity present in its asset structures,
well as financial structure and the efficiency with which working capital is
being used in the business. In other words, management can employ ratios
to analyze three facts of working capital management, namely, liquidity and its
structural health.
To analyze the level of current assets, current liabilities held and
working capital position of RSWM Banswara various ratios are used. These
ratios when compared with the ratios of past years show the improvement and
financial strength achieved by the company. The company is constantly
refining its working capital management process and reducing cost and risk.
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OPERATIONG CYCLE ANALYSIS OF RSWM BANSWARA
(Rs. In Lakhs)S. No.
Particulars 2005-06 2006-07 2007-08
1. Raw Material & Stores Storage Period (R)Opening Balance of Raw Material 2555.21 2984.56 3510.24Closing Balance of Raw Material 2984.56 3510.24 2899.00Average Stock of Raw Material (a) 2769.89 3247.40 3204.62Raw Material Consumed p.a. 16601.6 20290.0
622280.96
Average Raw Material Consumed/day (b) 45.48 55.59 60.77R= a/b (Days) 61 58 53
S. No.
Particulars 2005-06 2006-07 2007-08
2. Work – in – Progress Holding Period (W) Opening Balance of W – I – P 391.14 418.12 529.44Closing Balance of W – I – P 418.12 529.44 655.82Average W – I – P Inventory (a) 404.63 473.78 592.63Cost of Production 4897.05 5499.03 5831.11Average Cost of Production/day (b) 13.41 15.06 247.27
W= a/b (Days) 30 31 37
S. No.
Particulars 2005-06 2006-07 2007-08
3. Finished Goods Storage Period (F) Opening Balance of Finished Goods 702.30 922.04 581.4Closing Balance of Finished Goods 922.04 581.40 720.50Average Stock of Finished Goods (a) 812.17 751.72 650.95Cost of Sales/ Goods 7783.17 9480.81Average Cost of Goods Sales/day (b) 21.32 25.97
F= a/b (Days) 38 29
71
S. No.
Particulars 2004-05 2005-06 2006-07
4. Debtors Collection Period (D)Opening Debtors 3016.82 4018.48 5985.40Closing Debtors 4018.48 5985.40 7781.52Average Debtors (a) 3517.65 5001.94 6883.46Sales 25343.00 30601.5
136303.09
Average Sales/day (b) 69.43 83.84 99.46D= a/b (Days) 51 60 69
S. No.
Particulars 2004-05 2005-06 2006-07
5. Creditors Payment Period (C)Opening Creditors 30.45 52.34 64.32Closing Creditors 52.34 64.32 121.03Average Creditors (a) 41.40 58.33 92.68Total Purchases 18312.16 20207.98 22600.65Average Credit Purchases /day (b) 50.17 55.36 61.92
C= a/b (Days) 1 1 2
S. No.
Particulars 2004-05 2005-06 2006-07
* Operating Cycle Analysis Raw Material & Stores Storage Period (R)
49 61 58
Work – in – Progress Holding Period (W) 24 19 19Finished Goods Storage Period (F) 44 38 29Debtors Collection Period (D) 51 60 69Creditors Payment Period (C) (1) (1) (2)Operating Cycle Period (R+W+F+D-C)
in Days167 177 173
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Findings
Raw material and storage period is slightly less in comparison to previous years.
Working in progress period is almost same as compare to the last year, and company has achieved success in constantly reducing the finished goods inventory, it shows the efficient management of the company.
Creditor collection period is increased by one day and debtor’s collection period is increasing every year, which can be dangerous for the company. This highly needs attention.
When we see the over all operating cycle of RSWM Banswara, it has decreased in year under review. This is due to efficient management by the company people.
73
RATIOS USEFUL TO ANALYSE WORKING CAPITAL MANAGEMENT AT RSWM BANSWARA:-
(Rs. In Lakhs)
S.No.
Particulars 31.03.200731.03.200
6
1 LIQUIDITY RATIOS :
A. Current Ratio :- a) Current Assets 9519.25 10103.68b) Current Liabilities 4653.34 5669.41
* Current Ratio (a/b) 2.05:1 1.78:1
B. Liquid Ratio :- a) Current Assets 9519.25 10103.68b) Inventory 4843.53 4605.62c) Prepaid Expenses 0.72 50.58d) Current Liabilities 4653.34 5669.41
* Liquid Ratio [(a – b – c)/d] 1:1 0.96:1
C. Cash Ratio: - a) Cash 14.04 75.98b) Current Liabilities 4653.34 5669.41
* Cash Ratio (a/b) 0.30 1.34
2. ACTIVITY RATIOS:
A. Inventory Turnover Ratio (Times):
a) Cost of Goods Sold 32563.15 27527.64b) Average Stock 4724.58 4191.17
*Inventory Turnover Ratio(a/b)
6.86 6.57
B. Debtors Turnover Ratio (Times): -
a) Annual Credit Sales 36303.09 30601.51b) Average Debtors 2326.41 1956.46c) Average Bills Receivables 4557.06 3045.49
*Debtors Turnover Ratio[a/(b+c)]
5.27 6.12
C. Receivable Collection Period (365/DTR)
69 Days 60Days
D. Working Capital Turnover Ratio :-
a) Net Sales 36303.09 30601.51b) Working Capital 4865.91 4434.21
* Working Capital Turnover Ratio (a/b)
7.46 6.90
E. Current Assets Turnover
74
Ratio :-a) Cost of Goods Sold 32563.15 27527.64b) Current Assets 9519.25 10103.68
* Current Assets Turnover Ratio (a/b)
3.42 2.72
F. Fixed Assets Turnover Ratio :-a) Net Sales 36303.09 30601.51b) Fixed Assets 13597.61 11974.17
* Fixed Assets Turnover Ratio (a/b)
2.67 2.56
G. Total Assets Turnover Ratio :-a) Net Sales 36303.09 30601.51b) Total Assets 23116.86 22077.85
* Total Assets Turnover Ratio (a/b)
1.57 1.39
H. Capital Employed Turnover Ratio :-
a) Net Sales 36303.09 30601.51b) Capital Employed 18463.52 16408.44
* C.E.TOR (a/b) 1.97 1.86
3. STRUCTURAL RATIOS:
A. Current Assets To Total Assets: -
a) Current Assets 9519.25 10103.68b) Total Assets 23116.86 22077.85
* Current Assets To Total Assets (a/b)
0.41 0.46
B. Current Liabilities to Total Liabi. :
a) Current Liabilities 4653.34 5669.41b) Total Liabilities 26766.79 26651.78
* C L To T L (a/b) 0.17 0.21
C. Cash To Current Assets: - a) Cash 14.04 75.98b) Current Assets 9519.25 10103.68
* Cash To Current Assets (a/b) 0.001 0.008
D. Receivables to Current Assets: -
a) Receivables 5501.54 3612.57b) Current Assets 9519.25 10103.68
* Receivables to Current Assets (a/b)
0.58 0.36
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E. Inventory to Current Assets :-a) Inventory 4843.53 4605.62b) Current Assets 9519.25 10103.68
* Inventory to Current Assets (a/b)
0.51 0.46
4. PROFITABILITY RATIOS :
A. Profit Margin :-a) Profit Before Interest & Tax 3739.94 3073.87b) Net Sales 36303.09 30601.51
* Profit Margin Ratio [(a/b)*100] 10.30% 10.04%
B. Return on Investment (ROI) :-a) Profit Before Interest & Tax 3739.94 3073.87b) Total Investment 23116.86 22077.85
* ROI [(a/b)*100] 16.18% 13.92%
5. SOLVENCY RATIO :-a) Total Assets 23116.86 22077.85b) Total Debts 15514.56 15114.56
* Solvency Ratio (a/b) 1.49 1.46
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-: LIQUID RATIO :-
Current & Quick Ratios of 2006-2007 is increased from 2005-2006, whereas Cash Ratio is decreasing every year.
-: ACTIVITY RATIOS :-
Increases in Inventory Turnover Ratio & the Working Capital Turnover Ratio as compare to last years, whereas Debtors Turnover Ratio is decreasing every year.
77
-: ACTIVITY RATIOS :-
Current Assets Turnover Ratio, Fixed Assets Turnover Ratio & Total Assets Turnover Ratios of 2006-2007, are increased from last years.
-: PROFITABILITY RATIO :-
Profitability ratios like profit margin and return on investment are increasing every year, which is good for firm.
78
-: SOLVENCY RATIO :-
Solvency ratio of the firm is under control and increasing decimal wise yearly.
79
ANALYSIS OF FINDINGS OF VARIOUS
CALCULATIONS:-
1) Assessments of Working Capital :-
Since, the Working Capital of RSWM Banswara is increasing every
year but the Current Assets & Current Liabilities are decreasing from
the last year, these is due to following reasons:-
In Current Assets, Inventory & Loans & Advances are increases
from the last years. But Other Current Assets & Cash & Bank
balance is decreases, specially there is a drastically change in
Cash & Bank Balance. If we see the figures of Cash & Bank in
Balance-Sheet, we can find that there is increase in Cash in hand &
Saving a/c of the company, but decrease in fixed deposits of the
firm in 2006-2007 from Rs. 70.40 lakhs to Rs. 7.12 Lakhs. All these
Cash are invested in the Fixed Assets or Inventory of the firm and
this is happening every year. This shows that company is running at
the high risk. So company should increase its cash & bank balance
for good liquidity.
Current Liabilities was also decreased from 5669.41 to 4643.34 in
2006-2007, this is due to the no provision made in the year 2006-
2007 & also the low Working Capital loans.
If we see the changes we find that Current Assets & Current
Liabilities of 2005-2006 is increased from 2004-2005. Such a
volatility in current assets & current liabilities indicates poor working
capital management of the company and it must be controlled,
other wise it must be harmful in future for the company.
80
2) Ratio Analysis:-
Current Ratio measures short term solvency of the company.
Current Ratio of 2006-07 is more when compared to 2005-2006 and
equal to its ideal ratio i.e. 2:1, which clearly indicates that is good
for firms ability to meet current obligation.
Cash Ratio is decreases due to the less bank balance of the
company in every year. These is not a good indication for the
company is future & provides the high risk for company.
Increase in inventory turnover and decrease in debtors turnover
ratio is due to sluggishness in the market. Average collection period
is increase year by year. Company should try to reduce the
collection period days to utilize its working capital operating cycle.
Working capital turnover Ratio is increasing which shows that
working capital is more active i.e. it is supportive, comparatively
higher level of production sales is present.
Assets turnover ratios are showing improvement in the year under
review, which reflects management efficiency.
Structural ratios need attention, current assets to total assets has
reduced. Cash to current assets is also reduced year by year, which
can be harmful for the liquidity position of the firm and working
capital requirement. There is also increase in receivables and
inventory level.
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(6) SWOT ANALYSIS:-
STRENGTH:-
Demand of blended yarn will increase as the production of cotton is
(limited attraction of PV is replacing cotton, great share in exports one
of the biggest earners).
Won SRTEPC highest export award for PV yarn exports it was also
accorded “golden trading house status”.
Experienced & enthusiastic marketing team. Strong sales depots &
marketing offices at Mumbai, Delhi, Bhilwara, Ludhiana, Ahemadabad.
Brand Reputation Global Marketing – LNJ Bhilwara group is famous in
textiles in all over the world.
Well-equipped R&D SQC lab.
Modern machinery with latest techniques.
Not depended for power & water RSWM Banswara has its own power
generation plant & presently there are about 20000 surplus units of
power is available. The daily requirement of power for weaving project
is only 93111 units per day. Water is also available in plenty at
company’s own campus & presently company has adequate water
storage capacity.
Wide product range & flexibility in production according to requirement
of market. RSWM Banswara manufacturers various type of yarn of
different counts & blends.
All the units are connected through V-SAT Gulabpura, Mumbai, Delhi,
and Indore & Rishabdev.
The company has a great share in exports, one of the biggest earners.
Quality conscious approach as per ISO product & TQM gulabpura unit
was the first India composite textile unit to be certified with ISO 9002
82
1st September 1993, ISO certificate is necessary to penetrate in the
export market specially in the European in US market.
WEAKNESS:-
Banswara is not connected through railway line & condition of roads is
also poor so there is an infrastructure problem.
Skill labour is not available at Banswara.
Purchase Raw Material from one typed of organization only.
OPPORTUNITIES:-
After starting weaving project, Rajasthan spinning & weaving mills Ltd.
Banswara may further go for forward integration in garments sector, as
people in domestic market are gradually moving towards ready-made
garments.
To develop & improve working environment of processing by using
Eco-Friendly methods.
The company can rush into retail business.
Strategic alliances: Tie-ups with global manufacturers & brands for
technology & market.
Tilt towards ready-made.
India can become a major player in the textile export market at a global
market at a global level given the declining share of south-east Asian
countries in this niche market & rising wages in ASEAN region, wiping
out their competitive edge.
RSWM may be innovating new product using different types of yarn &
fiber like lyre & tennel.
83
Increased export demand is expected from planning out of capacities in
developed world.
Efficiency can increase with the help of IT & ERP.
Post-MFA as on January-1, 2005, the world trade in textile & clothing
will be fully liberalized. It can capture a large market share if it provides
quality product as reasonable price.
Market share of India is world trade of textile is only 2.8% therefore,
another advantage that India could have is that for countries which are
not the member of WTO, imposing countries will have obligation to
proceed with removal of quota restriction. This is especially important
with respect to China, Taiwan, who accounts for 32% of world trade in
textile, but are still not a member of WTO.
THREATS:-
Today textile industry is planning through in unpredicted recession.
The reason for that is supply is more than demand.
Cheap imports textiles from China, that is increasing free trade &
competition.
Removal of quotas after – 2005.
Changing trend in textile industry, changing requirement as people now
preferring ready-made garments.
Polyester Viscose is a substitute of cotton & is made from wood pulp &
its supply is also limited.
84
(7) CONCLUSION:-
RSWM Banswasra is one of the most leading companies of LNJ
Bhilwara Group. It has proper resources to manage its production cycle. All
the departments of RSWM Banswara are well coordinated with each other. It
has its customers in both global and domestic market.
RSWM has the latest technology for the production. The SQC and
CPPC departments are also strong. RSWM has policies like Environment
Policy & Quality Policy. It has a good brand image and good brands.
RSWM has also dad considerable success with major modernization
schemes involving almost total replacement of outdated equipments &
production methods, achieving capacity utilization. Also, RSWM has carried
out many engineering & maintenance improvements, resulting in lower
operating costs.
In order to conclude, it can be said that Working Capital Management
is effective only through proper blend of Cash Management, Receivables
Management, Inventory Management & Payables Management.
Company’s policy regarding management of all these are clean set. Company
keeps its position secure in both Debtors & Creditors dealings. The profit & turnover
of the company is increasing every year. The structural health of Working Capital is
improving continuously.It is a prosperous, growing firm which would attain heights
in coming years.
85
(8) RECOMMENDATIONS AND SUGGESTION:-
Improved co-ordination: Better co-ordination among purchase, production, marketing finance
department and effective communication will help in achieving greater efficiency in working capital management.
Prompt payment by customers: Prompt payment by customers can be ensured by prompt billing. What
the customers has to pay and the period of payment should be notified accurately and in advance. The use of mechanical device for billing along with the enclosure of a self-addressed return envelope will speed up the payment by customers.
Efficient inventory – production management:Another strategy is to increase the inventory turnover, avoiding stock-
outs, Le., and shortage of stock. This can be done in the following way: - Increasing the raw materials turnover. Decreasing the production cycle. Increasing the finished goods turnover.
Discounting policy should be liberalized by giving more cash discount to the customers.
Adopting of changing nouns:
Company should benchmark with global competitors and should use ideas like Just-in-Time (JIT) to improve inn~ntoll11’ management. And 14 Sigma would prove to be more effective in improving quality and 100% defects free finished products. Concentration Banking would help to speed up the cash collection.
Active disposal of obsolete, surplus inventories:
Efforts should be made to dispose obsolete and surplus inventories at reasonable and profitable price under a buy back arrangement with suppliers to avoid cost of charging it to profit & loss A/c.
To increase the cash:
86
RSWM Banswara, should increase the cash level to reduce the risk of it in future, if company has low cash it is difficult to work in future for more effectively. Since the cash ratio is decreasing year by year.
(9) BIBLIOGRAPHY :-
BOOKS : -
1) I.M. Pandey, Financial Management, 9th Edition, Vikas
Publishing House, New Delhi.2004.
2) M.Y. Khan & P.K. Jain, Financial Management, 4th
Edition, Tata McGraw-Hill, New Delhi, 2004.
3) MS-41 Working Capital Management (IGNOU Study
Material), Young Printing Press, New Delhi, 1997.
.
WEB SITES :-
1) www.rajasthanspg.com
2) www.lnjbhilwara.com
JOURNALS :-
1) Textiles Magazines.
2) Company Annual Report.
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