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A

PROJECT REPORT

ON

TO STUDY THE WORKING CAPITAL MANAGEMENT OF DABURINDIA LTD.

SUBMITTED IN PARTIAL FULFILLMENT FOR

THE AWARD OF THE DEGREE OF

BACHELOR OF BUSINESS ADMINISTRATION (2009-2012)

GURU GOBIND

INDRAPRASTHA UNIVERSITY

DAV INSTITUTE OF MANAGEMENT,

FARIDABAD

SUBMITTED TO: SUBMITTED BY:

MS. RANDEEP KAUR GAGAN BHARDWAJ

(PROJECT GUIDE) ENROLL NO:02012101709

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Table of CONTENTSStudent declaration..i

Certificate from Guide.ii

Acknowledgementiii

Executive Summary..iv

Chapter Schemev

List of Tables.vi

List of Graphsvii

List of Charts.viii

List if Abbreviations, if anyix

Page no.1. INTRODUCTION1.1.Purpose of the study..

1.2Research Objectives of the study..

1.3Research Methodology of the study.

1.3.1 Research Design.

1.3.2 Data Collection..

1.3.3 Limitation ..

CHAPTER -2Company Profile

CHAPTER -3Findings and Analysis..

CHAPTER -4Suggestions..

CHAPTER -5Conclusion and Limitation..Bibliographys

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STUDENT UNDERTAKING

This is to certify that I have completed The Project titled TO STUDY THE WORKING

CAPITAL MANAGEMENT OF DABUR in under the guidance ofMS. RANDEEP

KAUR in partial fulfillment of the requirement for the award of degree of Bachelor of

Business Administration at DAV INSTITUTE OF MANAGEMENT, FARIDABAD. This

is an original piece of work & I have not submitted it earlier elsewhere.

GAGAN BHARDWAJ

ENROLLMENT NO:07212101709

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CERTIFICATE

This is to certify that the project titled TO STUDY WORKING CAPITAL

MANAGEMENT OF DABUR is an academic work done by GAGAN BHARDWAJ

submitted in the partial fulfillment of the requirement for the award of the degree of

Bachelor Of Administration from DAV INSTITUTE OF MANAGEMENT, FARIDBAD,

under my guidance and direction. To the best of my knowledge and belief the data and

information presented by her in the project has not been submitted earlier.

MS. RANDEEP KAUR

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ACKNOWLEDGEMENT

With The blessings of almighty I was able to undertake and complete my project work on

STUDY OF WORKING CAPITAL MANAGEMENT OF DABUR. I would like to thank

all those who were always by my side to make my efforts fruitful.

My sincere thanks to my course coordinator, MS. RANDEEP KAUR who helped me in

completion of the project, without whose help the project would not have been completed.

I, therefore, acknowledge my in debtness to all who generously helped by sharing theirvaluable time and experience with me, without which this project would have never been

completed.

In the outset, I convey my sincere Thanks to all those who spared their precious time for

me. For giving me once again a great opportunity to work on the project and solving our

problems, doubts, queries, which I had during the making of my project.

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EXECUTIVE SUMMARY

Dabur India Limited has marked its presence with some very significant achievements and

today commands a market leadership status. Our story of success is based on dedication to

nature, corporate and process hygiene, dynamic leadership and commitment to our partners

and stake holders.

Further the project discusses the meaning, objectives, significance of the research, the

overall methodology applied and the also enumerates the sources of data collection. It

should be remembered that the project is prepared using secondary sources of data and no

primary sources have been used.

The project gives a brief history ofDabur India Limited , its founders and leaders . It also

gives a brief information of the board of directors managing the company.

Dabur India limited has three major strategic units namely Family Products Division ,

Dabur Ayurvedic Specialities and Health Care Products. It discusses the principles

followed by the company.

The project also gives a brief information regarding the products manufactured by Dabur

India Limited- Health Care Products, Personal Care Products, Foods, Ayurvedic

Specialities and the International Range of products.

Dabur India Limited spreads world wide and not only in India.

In Dabur India Limited knowledge and technology are key resources which have helped

the Company achieve higher levels of excellence and efficiency.

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The project discusses about the Working Capital Management ofDabur India Limited. A

good way to judge a company's cash flow prospects is to look at its Working Capital

Management (WCM). Cash is the lifeline of a company. If this lifeline deteriorates, so does

the company's ability to fund operations, reinvest, and meet capital requirements and

payments. Understanding a Companys cash flow health is essential to make investment

decisions.

The project at this stage began with the research of the financials of Dabur India Limited

through the official website of the company www.dabur.com. Basically the purpose for the

research was to understand as to what exactly is working capital, why do companies

require working capital, what is the ideal ratio of working capital to be maintained by the

Company, etc. After the research data was collected which was to be analyzed and

compared with the data of other companies (Hindustan Lever Ltd., Cadbury India Ltd.,

Nestle India Ltd., Britannia Industries and Marico Ltd.) to see how well the company is

handling and managing its finances.

The collected data was sorted out as per the requirements of the project. The data till the

year 2004-2005 has been analyzed and the working capital and ratios for Six major FMCG

companies that are: Dabur India Ltd., Hindustan Lever Ltd., Cadbury India Ltd., Nestle

India Ltd., Britannia Industries and Marico Ltd. have been compared.

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INTRODUCTION

Dabur India Limited has marked its presence with some very significant achievements and

today commands a market leadership status. Our story of success is based on dedication to

nature, corporate and process hygiene, dynamic leadership and commitment to our partners

and stake holders. The results of our policies and initiatives speak for themselves.

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Leading consumer goods company in India with a turnover of Rs.1268.72 Crore(FY04-

05)

Three major Strategic Business Units (SBU) Family Products Division (FPD), Health

Care Products (HCPD) and Dabur Ayurvedic Specialties (DASL).

Thirteen Ultra-Modern manufacturing units spread across four Countries.

Products marketed in over 50 Countries.

FPD, dealing with personal care, the largest SBU contributing to 45% sales of Dabur

Products related to hair care, Skin care, Oral care and Foods.

3 Leading brands- Vatika, Amla Hair Oil and Lal Dant Manjan with Rs.100 Crore

turnover each.

Vatika Hair oils and Shampoo the high growth brand.

Strategic positioning of honey as food product, leading to market leadership (over 40%)

in branded honey market.

HCPD, dealing with daily health care, Second largest SBU with 28% share in sales

Products related to Health Supplements, Digestive, Baby Care and Natural Cures.

Leadership in Ayurvedic and Herbal products market with highly popular brands.

Dabur Chyawanprash the largest selling Ayurvedic and Herbal products market with

highly popular brands.

Leader in Herbal Digestives with 90% market share.

Hajmola tablets in command with 75% market share of digestive tablets category.

Dabur Lal Tail tops baby massage oil market with 35% of total share.

DASL, dealing with classical Ayurvedic medicines.

Has more than 250 products sold through prescriptions, as well as over the counter

Major categories in traditional formulations include:

Asav Arishtas

Ras Rasayanas

Churans

Medicated Oils

Proprietary Ayurvedic medicines developed by Dabur include:

Nature Care Isabgol

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Madhuvaani

Trifgol

Division also works for promotion of Ayurveda through organized community of

traditional practitioners and developing fresh batches of students.

PURPOSE OF STUDY

The main emphasis is on Dabur India Ltd. With the overall turnover of Rs 1268.72

crores.

This study will include following objectives:

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To study Dabur India Ltd. evolution and why it is so successful.

To study the production function and management of the company and compare the

company with other competitive companies.

To study the future plans, financial reports and Daburs strength as business

organization.

To study the working capital management of the company and then comparing the

working capital management with its competitors and finding the result.

RESEARCH METHODOLOGY

Meaning of Research

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Redman and Mory define research as a systemized effort to gain new knowledge. Some

people consider research as a movement, a movement from the known to the unknown.

Research is an academic activity and as such the term should be used in a technical sense.

According to Clifford Woody, research comprises defining and redefining problems,

formulating hypothesis or suggested solutions; collecting, organizing and evaluating data;

making deductions and reaching conclusions; and at last carefully testing the conclusions to

determine whether they fit the formulating hypothesis.

Objectives of Research

i) The purpose of research is to discover answers to questions through the

application of scientific procedures. The main aim of research is to find out the

truth which is hidden and which has not been discovered as yet. To safeguard the

interest of consumer and organization by securing the highest level of mutual

understanding and goodwill among all those sections in the industry which

participate in the process of achieving organizational objective.

ii) To avoid consumer conflict and develop harmonious relations, which

are an essential factor to growth of any company.

iii) To establish harmonious relationship between operative staff and

management by providing safeguard to their respective interests and developing

understanding and goodwill between them.

Dabur India Ltds objective is to always attain, maintain and exceed standards in

Quality and Customer Satisfaction. No compromise with quality is the major objective of

Dabur Pharma Ltd.. Dabur Pharma Ltd. focus mainly on the following

To focus on quality

To promote team work

Employee commitment to quality is encouraged, valued and rewarded.

Employee training programs on quality measurement and improvements.

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Providing services to the customer with exactly what they want at the right

time.

Maintaining the long term benefit.

Significance of Research

All process is born of inquiry. Doubt is often better than overconfidence, for it leads to

inquiry and inquiry leads to invention. Is a famous Hudson Maxim in context of which

the significance of research can well be understood. Increased amounts of research make

progress possible.

Research inculcates scientific and inductive thinking and it promotes the development oflogical habits of thinking and organization.The role of research in several fields of applied

economics, whether related to business or to the economy as a whole, has greatly

increased in modern times. The increasing complex nature of business and government has

focused attention on the use of research in solving operational problems. Research, as an

aid to economic policy, has gained added importance, both for government and business.

Research Methodology

Research methodology is a way to systematically solve the research problem. It

may be understood as a science of studying how research is done scientifically. In it we

study the various steps that are generally adopted by a researcher in studying his research

problem along with the logic behind them. It is necessary for the researcher to know not

only the research methods or techniques but also the methodology. There are two main

categories of research methods. Secondary research uses research that has already been

done by someone else. For example, marketers often find information compiled by the U.S.

Census very useful. However, in some cases, information specific enough to satisfy a

firms needs is not publicly available. For example, a firm will have to run its own research

to find out whether consumers would prefer that more vanilla taste be added to its soft

drink brand. Original research that a firm does for it is known asprimary research.

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There is no one perfect primary research method. Each has strengths and

weaknesses, and thus the appropriate method must be selected based on research needs.

Surveys are useful for getting a great deal of specific information. Surveys can

contain open-ended questions (e.g., "In which city and state were you born?") or closed-

ended, where the respondent is asked to select answers from a brief list (e.g., "__Male ___

Female.") Open ended questions have the advantage that the respondent is not limited to

the options listed, and that the respondent is not being influenced by seeing a list of

responses. However, open-ended questions are often skipped by respondents, and coding

them can be quite a challenge. In general, for surveys to yield meaningful responses,

sample sizes of over 100 are usually required because precision is essential. For example, if

a market share of twenty percent would result in a loss while thirty percent would beprofitable, a confidence interval of 20-35% is too wide to be useful.

Surveys come in several different forms. Mail surveys are relatively inexpensive,

but response rates are typically quite lowtypically from 5-20%. Phone-surveys get

somewhat higher response rates, but not many questions can be asked because many

answer options have to be repeated and few people are willing to stay on the phone for

more than five minutes. Mall intercepts are a convenient way to reach consumers, but

respondents may be reluctant to discuss anything sensitive face-to-face with an interviewer.

Surveys, as any kind of research, are vulnerable to bias. The wording of a question

can influence the outcome a great deal. For example, more people answered no to the

question "Should speeches against democracy be allowed?" than answered yes to "Should

speeches against democracy be forbidden?" For face-to-face interviews, interviewer bias is

a danger, too. Interviewer bias occurs when the interviewer influences the way the

respondent answers. For example, unconsciously an interviewer that works for the firm

manufacturing the product in question may smile a little when something good is being

said about the product and frown a little when something negative is being said. The

respondent may catch on and say something more positive than his or her real opinion.

Finally, a response bias may occurif only part of the sample responds to a survey, the

respondents answers may not be representative of the population.

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Experiments are used when the researcher wants to rule out all but one explanation

for a particular observation. Suppose, for example, that we observe that sales of our brand

increase when we send out coupons. However, retailers may also give us better shelf space

when the coupon is out; thus, we cant tell if it was the coupon or the shelf-placement that

caused sales to increasethe two variables are confounded. In an experiment, we carefully

control what varies. In this case, we invite in one hundred people and ask them to shop in a

simulated store. Half of the respondents are randomly selected and get a coupon; the others

do not. Since the only difference here was whether the subjects got a coupon or not, we can

be more confident that differences in brand choice were due to the coupon. Experiments

do, however, have a serious drawback in that the consumer is removed from his or her

natural surroundings. For example, if we pay some consumers to come into a lab and watch

TV "as you normally would," these consumers, figuring that they are being paid, may give

more attention to the advertisements than they would at home.

Focus groups involve getting a group of 6-12 consumers together to discuss

product usage. Focus groups are especially useful if we do not have specific questions to

ask yet, since we dont know what consumers concerns might be. We start out talking

broadly about the need that a product might serve, and only gradually move toward the

product itself. For example, a firm considering the marketing of sugar free cookies might

start out its group talking about snackswhy people consume them and the benefits they

expect. Gradually, we then move toward concerns people have about snacks. Eventually,

we address sugar content and concerns that consumers have about that. Only toward the

end of the session do we show consumers the actual product we are considering and ask for

feedback. We postpone our consideration of the actual product toward the end because we

want to be sure that we find out about the consumers needs and desires rather than what he

or she thinks about the specific product we have on the drawing board right now (that

product can be changed, and it can be repositioned). Drawbacks of focus groups include

high costs and the fact that generalization toward the entire population is difficult for such

small sample sizes. The fact that focus groups involve social interaction also means that

participants may say what they think will make themselves look good rather than what they

really believe (the social desirability bias).

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Personal interviews involve in-depth questioning of an individual about his or her

interest in or experiences with a product. The benefit here is that we can get really into

depth (when the respondent says something interesting, we can ask him or her to

elaborate), but this method of research is costly and can be extremely vulnerable to

interviewer bias.

Projective techniques are used when a consumer may feel embarrassed to admit to

certain opinions, feelings, or preferences. For example, many older executives may not be

comfortable admitting to being intimidated by computers. It has been found that in such

cases, people will tend to respond more openly about "someone else." Thus, we may ask

them to explain reasons why a friendhas not yet bought a computer, or to tell a story about

aperson in a picture who is or is not using a product. The main problem with this methodis that it is difficult to analyze responses.

Observation of consumers is often a powerful tool. Looking at how consumers

select products may yield insights into how they make decisions and what they look for.

For example, some American manufacturers were concerned about low sales of their

products in Japan. Observing Japanese consumers, it was found that many of these

Japanese consumers scrutinized packages looking for a name of a major manufacturerthe

product specific-brands that are common in the U.S. (e.g., Tide) were not impressive to the

Japanese, who wanted a name of a major firm like Mitsubishi or Proctor & Gamble.

Observation may help us determine how much time consumers spend comparing prices, or

whether nutritional labels are being consulted.

Physiological measures are occasionally used to examine consumer response. For

example, advertisers may want to measure a consumers level of arousal during various

parts of an advertisement.

Segmentation

Although the text makes references to segmentation, this issue is not discussed

explicitly in much detail. However, segmentation is important in consumer analysis

because understanding the consumer will allow us segment the market more meaningfully.

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Segmentation basically involves dividing consumers into groups such that

members of a group (1) are as similar as possible to members of that same group but

(2) differ as much as possible from members other segments. This enables us then to

"treat" each segment differentlye.g., by:

Providing different products (e.g., some consumers like cola taste, while others

prefer lime)

Offering different prices (some consumers will take the cheapest product available,

while others will pay for desired features)

Distributing the products where they are likely to be bought by the targeted

segment.

Useful segment structure includes:-

Each segment must have an identityi.e., it must contain members that can be

described in some way (e.g., price sensitive) that behave differently from another

segment.

Each segment must engage in systematic psychologys (e.g., a price sensitive

segment should consistently prefer the low price item rather than randomly

switching between high and low priced brands).

Each segment must offer marketing mix efficiency potentiali.e., it must be

profitable to serve. For example, a large segment may be profitable even though the

competition it attracts tends to keep prices down. A smaller segment may be

profitable if, for example, it is price insensitive or can be targeted efficiently. Some

segments are not cost effective.

Data Source

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The data can be collected from two sources, i.e. Primary and Secondary. I have collected

entire data of this project on ITC Ltd. from SECONDARY SOURCES like websites i.e.

www.daburindia.com, www.wikipedia.com, www.google.com., books like India today,

outlook, business week, newspapers and magazines.

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COMPANY PROFILE

COMPANY HISTORY

1884 Birth of Dabur

The birth of Dabur in a small Calcutta pharmacy, where Dr. S.K.Burmanlaunches his mission of making healthcare products.

1896 Setting up of a manufacturing plant

With growing popularity of Dabur products, Dr. Burman expands his operartions by

setting up a manufacturing plant for mass production of formulation.

Early 1900s Ayurvedic Medicines

Dabur enters the specialized area of nature-based Ayurvedic medicines, for which

standardized drugs are not available in the market.

1919 Establishment of Research Laboratories

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The need to develop scientific processes & quality checks for mass production of

traditional Ayurvedic medicines leads to establishment of research laboratories.

1920 Expands further

Dabur expands further with new manufacturing units at Narendrapur & Daburgram.

The distribution of Dabur products spreads to other states like Bihar and the North-

East.

1936 Dabur India (Dr.S.K.Burman) Pvt. Ltd.

Dabur becomes a fulfledged company- Dabur India (Dr.S.K.Burman) Private Limited.

1972 Shift to Delhi

Daburs operations shift to Delhi. A new manufacturing plant is set up in temporary

premises in Faridabad, on the outskirts of Delhi.

1979 Sahibabad factory/Dabur research foundation

Commercial production starts in the new Sahibabad factory of Dabur, one of the largest

and best equipped production facilities for Ayurvedic medicines. Launch of ful-fledged

research operations in pioneering areas of healthcare with establishment of the Dabur

Research Foundation.

1986 Public Limited Company

Dabur becomes a public ltd co. Dabur India Ltd comes into being after reverse merger

with Vidogum Ltd.

1992 Joint Venture with Agrolimen of SpainBeginning a new chapter of strategic partnerships with international businesses, dabur

enters into a joint venture with Agrolimen of Spain. Tis new venture is to manufacture

& market confectionery items in India.

1993 Cancer treatment

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Dabur enters into specialized healthcare area of cancer treatment with its oncology

formulation plant at Baddi in Himachal Pradesh.

1995 Joint Ventures

Dabur India Ltd. raises its first issue. Dabur enters into joint ventures with Osem of

Israel for food & Bongrain of France for cheese & other dairy products.

1996 Three separate divisions

For better operations and management, 3 separate divisions are created according to

their product mix- Health Care Products Division, Family Product Division and Dabur

Ayurvedic Specialities ltd.

1997 Foods Division / Project STARS

Dabur enters full scale in the nascent processed foods market with the creation of food

division.

Project STARS (Strive To Achieve Record Successes) is initiated to give a jump start

to the company and accelerate its growth performance.

1998 Professionals to manage the Company

With the changing demands of business and to inculcate a spirit of corporate

governance, the Burman family inducts professionals to manage the company. For the

first time in the history of Dabur, a non-family professional CEO sits at the helm of the

company.

2000 Turnover of Rs.1,000 crores

Dabur establishes its market leadership status with a turnover of Rs. 1000 Crores. From

a small beginning and upholding the values of its founder, Dabur now enters the august

league of large corporate business.

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2003 Demerged its Pharmaceuticals Division

Dabur India approved the damager of its pharmaceuticals business from the FMCG

business into a separate company as a part of plans to provide greater focus of both the

businesses. With this, Dabur India now largely comprises of the FMCG business that

include personal care products ,healthcare products & ayurvedic specialities. While the

pharmaceuticals business would include Allopathic, Oncology formulations and Bulk

drugs. Dabur Oncology Plc, a subsidiary of Dabur India, would also be part of the

pharmaceutical business.

2005 Dabur acquires Balsara

As part of its inorganic growth strategy, Dabur India acquires Balsaras Hygienic and

Home products business, a leading provider of oral care and household care products in

the Indian market, in a Rs. 143 crore all-cash deal.

2005 Dabur announces bonus after 12 years

Dabur India announced issue of 1:1 Bonus share to the shareholders of the company,

i.e. one share for every one share held. The Board also proposed an increase in the

authorized share capital of the company from existing Rs. 50 crore to Rs. 125 crore.

2006 Dabur crosses $2 Bin market Cap, adopts US GAAP

Dabur India crosses the $2-Billion mark in market capitalization. The company also

adopted US GAAP in line with its commitment to follow global best practices and

adopt highest standards of transparency and governance.

2007 Celebrating 10 years of real

Dabur foods unveiled the new packaging and design for Real at the completion of 10

years of the brand. The new refined modern look depicts the natural goodness of juice

from freshly plucked fruits.

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2007 Foray into organized retail

Dabur India announced its foray into the organized retail business through a wholly

owned subsidiary, H & B Stores Ltd. Dabur will invest Rs. 140 crores by 2010 to

establish its presence in the retail market in India with a chain of stores on the Health &

Beauty format.

2007 Dabur foods merged with Dabur India

Dabur India decides to merge its wholly-owned subsidiaryDabur Foods with itself to

extract synergies and unlock operational efficiencies. The integration will also help

Dabur sharpen focus on the high growth business of foods and beverages and enter

newer product categories in this space.

OVER HUNDRED YEARS OF CARING

Dabur commenced operations in 1884 and is today a multi- locational, multi-productenterprise. The company has major interests in health and beauty care.

Dabur is a leader in Ayurveda the traditional Indian health care system.

The company has 12 manufacturing plants in India, Nepal and Egypt. Dabur products are

also manufactured in Dubai.

Dabur has a transactional network of 19 offices servicing both rural and urban markets in

India.

The company has sales and marketing offices in Dubai and London. Dabur products are

available in over 50 countries.

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FOUNDING THOUGHTS

What is that life worth which cannot bring comfort to

others

The doorstepDAKTAR

The story ofDabur began with a small, but visionary endeavor by Dr. S. K. Burman, aphysician tucked away in Bengal. His mission was to provide effective and affordable cure

for ordinary people in far-flung villages. With missionary zeal and fervor, Dr. Burman

undertook the task of preparing natural cures for the killer diseases of those days, like

cholera, malaria and plague.

Soon the news of his medicines traveled, and he came to be known as the trusted 'Daktar'

or Doctor who came up with effective cures. And that is how his venture Dabur got its

name - derived from the Devanagri rendition of Daktar Burman. Dr. Burman set up Dabur

in 1884 to produce and dispense Ayurvedic medicines. Reaching out to a wide mass of

people who had no access to proper treatment. Dr. S. K. Burman's commitment and

ceaseless efforts resulted in the company growing from a fledgling medicine manufacturer

in a small Calcutta house, to a household name that at once evokes trust and reliability.

CEO

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MR. SUNIL DUGGAL

BOARD OF DIRECTORS

Dabur has an illustrious Board of Directors who are committed to take the company onto

newer levels of human endeavour in the service of mankind. The Board comprises of:

CHAIRMAN

Dr. ANAND BURMAN

VICE-CHAIRMAN

Dr. AMIT BURMAN

CHIEF EXECUTIVE OFFICER

Mr. SUNIL DUGGAL

WHOLE TIME DIRECTORS

MR P.D. NARANG

P.D. Narang, is the Group Director, Corporate Affairs, Dabur India Limited. Born

in 1954, Mr. Narang specialized in finance and started his professional career in

1979 with his own practice. He joined the Dabur family in 1983 as a management

consultant with a mandate to streamline the finance, accounts and audit functions of

the company.

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MR. SUNIL DUGGAL

Sunil Duggal took over as the Chief Executive Officer of Dabur India Limited in

June 2002, holding reins of the organization he joined in 1995.

MR. PRADIP BURMAN

Mr. Burman was born on 2 november 1942,.

Chairman of Governing body(Aug86 to june99) PHDCCI- Rural

development Foundation, Delhi-a non-Profit organization looking

after socio-economic activities of the rural areas. Founder chairman

of Sundesh a non-profit organization involved in the education of

rural women and in other socio-economic activities.

NON-WHOLE TIME DIRECTORS

MR. MOHIT BURMAN

Mr. Burman was born on July 20, 1968 in Calcutta.

Mohit Burman, son of Mr. Vivek and Mrs Monica Burman, is the

driving force behind the Burman family's foray into several high-

growth and sunrise sectors of Financial Services like Life Insurance,

Pensions, Annuities and Asset Management, besides Agriculture and

Retailing.

INDEPENDENT DIRECTORS

HIS HIGHNESS MAHARAJA GAJ SINGH

Date of Birth- 13.01.1948

MR. P.N. VIJAY


MR R.C.BHARGAVA

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DR. S NARAYAN


DABURS MAJOR STRATEGIC BUSINESS UNITS

Dabur has three major Strategic Business Units (SBUs) namely:

Family Products Division with a share of 45% in its total sales.

Dabur Ayurvedic Specialities having a share of 27% in its total sales.

Health Care Products with a share of 28% in the total sales.

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DABURS CORE VALUES

28

D a b u r s S B U s A n d T hei r S ha r

F a m il

P r o d u c

D iv is io4 5 %

He a lth C

P r o d u c t

2 8 %

D a b u r

A yu rve d

Spec ia l i t i

2 7 %

F a m ily P ro d

D iv i s ion

H e a lth C a r e

P r o d u c t sD a b u r Ay u r v

Spec ia l i t i es


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VISION

Dedicated to the health and well being of every household.

PRINCIPLES

OWNERSHIP

This is our company. We accept personal responsibility, and accountability to meet

business needs.

PASSION FOR WINNING

We all are the leaders in our area of responsibility, with a deep commitment to deliver the

results. We are determined to be the best at doing what matters the most.

PEOPLE DEVELOPMENT

People are our most important asset. We add value through result driven training, and we

encourage and award excellence.

CONSUMER FOCUS

We have superior understanding of consumer needs and develop products to fulfill them

better.

TEAM WORK

We work together on the principle of mutual trust and transparency in a boundary less

organization. We are intellectually honest in advocating proposals, including recognizing

risks.

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INNOVATION

Continuous innovation in products & processes is the basis of our success.

INTEGRITY

We are committed to the achievement of business success with integrity. We are honest

with the consumers, with business partners and with each other.

PRODUCTS

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HEALTH SUPPLEMENTS:

Dabur Chyawanprash

Dabur Glucose D

DIGESTIVES:

Hajmola Mast Masala

Anardana

Hajmola

Hajmola Candy

Hajmola Candy Fun2

Pudin Hara(Liquid and Pearls)

Pudin Hara G

Dabur Hingoli

BABY CARE:

Dabur Lal Tail

Dabur Baby Olive Oil

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Dabur Janma Ghunti

NATURAL CURES:

Shilajit Gold

Nature Care

Sat Isabgol

Shilajit

Ring Ring

Itch Care

Back-Aid

Shankha Pushpi

Dabur Balm

HAIR CARE OIL:

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Amla Hair Oil

Amla Lite Hair Oil

Vatika Hair Oil

Anmol Sarson Amla

HAIR CARE SHAMPOO:

Vatika Henna Conditioning Shampoo

Vatika Anti Dandruff Shampoo

Anmol Natural Shine Shampoo

SKIN CARE:

Gulabari

Vatika Fairness Face Pack

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ORAL CARE:

Dabur Red Gel

Dabur Red Toothpaste

Dabur Lal Dant Manjan

Dabur Binaca Toothbrush

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REAL:

Real Fruit Juice

Real Activ

HOMMADE:

Cooking Pastes

Coconut Milk

Tomato Puree

CAPSICO RED LEMONEEZ

Dashmularishta

Ashokarishta

Lauhasava

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Mahanarayan Tail

Juritap

Madhuvani

Lavan Bhaskar Churna

HEALTH CARE:

Dabur Chyawanprash

Pudinhara

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Hajmola Tablets

Dabur Honey

Shilajit

SKIN CARE:

Natural Soaps

ORAL CARE:

Herbal Tooth Paste

HAIR CARE:

Vatika Shampoos and Conditioners

Dabur Amla Hair Oil

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FOODS:

Real Juices

Homemade Food Products

DR.BURMAN (RUSSIA)

Health Supplements

Ayurvedic Toothpastes

DABUR MANUFACTURING FACILITIES IN INDIA

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DABUR WORLD WIDE

Dabur's mission of popularizing a natural lifestyle transcends national boundaries. Today

there is global awareness of alternative medicine, nature-based and holistic lifestyles and

an interest in herbal products. Dabur has been in the forefront of popularizing this

alternative way of life, marketing its products in more than 50 countries all over the world.

DABURproducts World Wide

Dabur has spread widely and deeply to be in close touch with overseas consumers.

Offices and representatives in Europe, America and Africa;

A special herbal health care and personal care range successfully selling in markets

of the Middle East, Far East and several European countries.

Inroads into European and American markets that have good potential due to

resurgence of the back-to-nature movement.

Export of Active Pharmaceutical Ingredients (APIs), manufactured under strict

international quality benchmarks, to Europe, Latin America, Africa, and other

Asian countries.

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Export of food and textile grade natural gums, extracted from traditional plant

sources.

RE-ENGINEERING FOR VALUE CREATION

DABUR HAS RE-ORGANIZED TWO OF ITS BIGGEST SBUS- THE FAMILY

PRODUCTS DIVISION (PERSONAL CARE PRODUCTS) AND THE HEALTH CARE

DIVISION INTO A SINGLE SBU. THIS INITIATIVE WILL ELIMINATE OVERLAPS

AND REDUCE COSTS BY LEVERAGING SYNERGIES OF SCALE.

RE-ENGINEERING INTERNAL OPERATIONS TO LEVERAGE STRENGTHS AND

SYNERGIES, IMPROVE SCALE, REDUCE COST AND OPTIMIZE EFFICIENCIES

ARE KEY FOR IMPROVED VALUE CREATION. TO DERIVE MAXIMUM VALUES

ON THESE PARAMETERS, DABUR HAS EMERGED ITS ERSTWHILE SBUS- THE

FAMILY PRODUCT DIVISION AND HEALTH CARE PRODUCTS DIVISION INTO

ONE.

THE COMMON ARRANGEMENT WILL ELIMINATE ANY OVERLAPS IN THE

DISTRIBUTION AND RETAIL NETWORK, PROVIDE ECONOMIES OF SCALE

AND HELP THE COMPANY BE MORE RESPONSIVE TO MARKET NEEDS.

FOCUS WILL BE ON PRODUCT CATEGORIES AND RESOURCES WILL BE

POOLED TO STRENGTHEN INDIVIDUAL CATEGORIES WITH AGGRESSIVE

SALES AND MARKETING INITIATIVES.

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THIS MOVE WILL INJECT A NEW IMPULSE IN DABUR AND ALSO BOOST THE

COMPANYS SALES EFFORTS.

DEMERGING FOR VALUE CREATION

THE DEMERGER OF DABURS FMCG AND PHARMACEUTICAL BUSINESSES IS

A VALUE-ENHANCING MOVE REPRESENTING A WIN-WIN SITUATION FOR

BOTH THESE BUSINESSES. A CLEAR LINE OF SIGHT AND FOCUSED GROWTH

STRATEGIES WOULD PROVIDE EXPONENTIAL GROWTH OPPORTUNITIESAND GREATER VALUE FOR SHAREHOLDERS.

THIS DEMERGER OF DABURS FMCG AND PHARMACEUTICAL BUSINESS IS A

MAJOR RESTRUCTURING MOVE UNDERTAKEN BY THE COMPANY TO

PROVIDE GREATER FOCUS AND INDEPENDENCE TO THE TWO BUSINESSES.

THE FMCG BUSINESS, WHICH WILL BE THE MAIN BUSINESS OF DABUR

INDIA, WILL CONCENTRATE ON STRENGTHENING ITS CORE COMPETENCIES

IN PERSONAL CARE, HEALTH CARE AND AYURVEDA.

THE NEW PHARMACEUTICAL COMPANY- DABUR PHARMA LTD.- WILL

FOCUS ON ITS EXPERTISE IN ALLOPATHY, ONCOLOGY FORMULATIONS AND

BULK DRUGS. THE COMPANY IS ALREADY A LEADER IN THE ONCOLOGY

SEGMENT IN INDIA AND WILL FOLLOW AGGRESSIVE STRATEGIES TO

PURSUE ITS GLOBAL AMBITIONS.

BOTH THESE COMPANIES WILL HAVE DEDICATED MANAGEMENT TEAMS,

WITH THE FREEDOM AND RESOURCES TO PURSUE THEIR INDEPENDENT

GROWTH STRATEGIES.

DABUR BELIEVES THAT THE SUM OF PARTS WILL FAR EXCEED THE VALUE

OF THE SINGLE ENTITY.

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FINDINGS AND ANALYSIS

IT INITIATIVES

In Dabur India Limited knowledge and technology are key resources which have helped

the Company achieve higher levels of excellence and efficiency. Towards this overall goal

of technology-driven performance, Dabur is utilizing Information Technology in a big way.

This will help in integrating a vast distribution system spread all over India and across the

world. It will also cut down costs and increase profitability.

Our major IT Initiatives

Migration from Baan and Mfg ERP Systems to centralized SAP ERP system from

1st April 2006 for all business units.

Implementation of a country wide new WAN Infrastructure for running centralized

ERP system. Setting up of new Data Centre at KCO Head Office.

Extension of Reach System to distributors for capturing Secondary Sales Data.

Roll out of IT services to new plants and CFAs.

Future Challenges

Forward Integration of SAP with Distributors and Stockists.

Backward Integration of SAP with Suppliers.

Implementation of new POS system at Stockist point and integration with SAP-

ERP.

Implementation of SAP HR and payroll.

SAP Roll-out to DNPL and other new businesses.

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INTRODUCTION TO WORKING CAPITAL

Working Capital is the Life-Blood And Controlling Nerve Center of a Business

THE TERM WORKING CAPITAL REFERS TO THE CAPITAL REQUIRED FOR

DAY-TO-DAY OPERATIONS OF A BUSINESS ENTERPRISE. IT IS REPRESENTED

BYEXCESS OF CURRENT ASSETS OVER CURRENT LIABILITIES. IT IS NECESSARY

FOR ANY ORGANIZATION TO RUN SUCCESSFULLY ITS AFFAIRS, TO PROVIDE

FOR ADEQUATE WORKING CAPITAL. TOO LARGE INVESTMENT IN CURRENT

ASSETS MEANS BLOCKING THE CAPITAL THAT CAN BE USED

PRODUCTIVELY ELSEWHERE. ON THE OTHER HAND TOO LITTLE

INVESTMENT CAN BE EXPENSIVE. FOR EXAMPLE, INSUFFICIENT INVENTORY

MAY CAUSE LOSS OF SALES TO CUSTOMERS.

All this indicates that proper estimation of the Working Capital requirements is a must for

running the business efficiently and profitably.

Working capital is therefore:-

WORKING CAPITAL

=

Current Assets

||

stock+ debtors + cash

- Current liabilities

The importance of having working capital is best understood as 'costs expended before

payment received for goods/service provided to the customer'. Therefore, no capital means

no production and no customers, which means no capital...

45
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There are basically two concepts of working capital-

Gross Working Capital:

It is the amount of capital invested in the total Current assets of the enterprise. Current

assets are those assets, which in ordinary course of business can be converted into cash

within a short period of normally one accounting year.

Net Working Capital:

It refers to the difference between net current assets and liabilities. Current liabilities

are those claims of outsiders, which are expected to mature for payment within an

accounting year. Net working capital can be positive or negative. A positive net

working capital will arise when current assets increase current liabilities. A negativeworking capital will arise when current liabilities are in excess of current assets.

Current Assets:

Current assets, sometimes called liquid assets, are those resources of a firm, which are

either held in the form of cash or are expected to be converted in cash within the

accounting period in one-year duration. The operating cycle is the time taken to convert the

raw materials into finished goods and convert receivables (goods sold on credit) into cash.

Current Assets include:

Cash in hand

Bank balances

Bills Receivables

Sundry Debtors (less provision for bad debts)

Short term loans and advances

Inventories of stocks, as:

Raw material

Work in progress

Stores and spares

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Finished Goods

Temporary Investments of surplus funds

Prepaid expenses

Accrued Incomes.

Current Liabilities:

CURRENT LIABILITIES ARE DEBTS PAYABLE WITHIN AN ACCOUNTING

PERIOD. CURRENT ASSETS ARE CONVERTED INTO CASH TO PAY CURRENT

LIABILITIES.

CURRENT LIABILITIES INCLUDE:

BILLS PAYABLE

SUNDRY CREDITORS OR ACCOUNTS PAYABLE

ACCRUED OR OUTSTANDING EXPENSES

SHORT TERM LOANS, ADVANCES OR DEPOSITS.

DIVIDENDS PAYABLE

BANK OVERDRAFT

PROVISION FOR TAXATION, IF IT DOES NOT AMOUNT TO

APPROPRIATION OF PROFITS.

IT IS A CONVENTIONAL RULE TO MAINTAIN THE LEVEL OF CURRENT

ASSETS TWICE THE LEVEL OF CURRENT LIABILITIES. A WEAK LIQUIDITY

POSITION POSES A THREAT TO THE SOLVENCY OF THE COMPANY AND

MAKES IT UNSAFE AND UNSOUND. A NEGATIVE WORKING CAPITAL MEANS

A NEGATIVE LIQUIDITY AND AT TIMES IT MAY PROVE TO BE HARMFUL FOR

THE COMPANYS REPUTATION. EXCESSIVE LIQUIDITY IS ALSO BAD. IT MAY

BE DUE TO MISMANAGEMENT OF CURRENT ASSETS. THEREFORE PROMPT

AND TIMELY ACTION SHOULD BE TAKEN BY THE MANAGEMENT TO

IMPROVE AND CORRECT THE IMBALANCES IN THE LIQUIDITY POSITION OF

THE FIRM.

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GROSS WORKING CAPITAL IS A GOING CONCERN/FINANCIAL CONCEPT

WHERE AS THE NET WORKING CAPITAL IS AN ACCOUNTING CONCEPT OF

WORKING CAPITAL.

IMPORTANCE OF WORKING CAPITAL

Working capital constitutes part of the Crown's investment in a department. Associated

with this is an opportunity cost to the Crown. (Money invested in one area may "cost"

opportunities for investment in other areas.) If a department is operating with more

working capital than is necessary, this over-investment represents an unnecessary cost to

the Crown.

OBJECTIVE:

The objective of working capital management is to maintain the optimum balance of each

of the working capital components. This includes making sure that funds are held as cash in

bank deposits for as long as and in the largest amounts possible, thereby maximizing the

interest earned. However, such cash may more appropriately be "invested" in other assets

or in reducing other liabilities. Other objectives of working capital management are as

follows: -

To identify cash flow cycles of the firm.

To maintain the level of current assets twice the level of current liabilities.

To help the company to maintain good business relations.

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To determine the future capital, liquidity position and other requirements of

the company.

Working capital management takes place at two levels:

Ratio analysis can be used to monitor overall trends in working capital and

to identify areas requiring closer management.

The individual components of working capital can be effectively managed

by using various techniques and strategies.

When considering these techniques and strategies, departments need to recognize that eachdepartment has a unique mix of working capital components. The emphasis that needs to

be placed on each component varies according to department. For example, some

departments have significant inventory levels; others have little if any inventory.

Furthermore, working capital management is not an end in itself. It is an integral part of the

department's overall management. The needs of efficient

Working capital management must be considered in relation to other aspects of the

department's financial and non-financial performance.

CLASSIFICATION OF WORKING CAPITAL

Working Capital is classified on the following two basis:

(a) On basis of time

(b) On basis of concept

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KINDS OF WORKING CAPITAL

On basis of Concept On basis of Time

Gross Net Permanent/ Temporary/ Working Working

Fixed Variable

Capital Capital Working Working

Capital Capital

Regular Reserve Seasonal Special

WC WC WC

Permanent or Fixed Working Capital:

IS THE MINIMUM AMOUNT OF WORKING CAPITAL REQUIRED TO ENSURE

EFFECTIVE UTILIZATION OF FIXED FACILITIES AND FOR MAINTAINING THE

CIRCULATION OF CURRENT ASSETS.

THERE IS ALWAYS A MINIMUM LEVEL OF CURRENT ASSETS, WHICH ARE

CONTINUOUSLY REQUIRED BY THE ENTERPRISE TO CARRY OUT ITS

NORMAL BUSINESS OPERATIONS. EXAMPLE: EVERY FIRM HAS TO MAINTAIN

A MINIMUM AMOUNT OF RAW MATERIALS, WORK-IN-PROGRESS, FINISHED

GOODS AND CASH BALANCE.

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MINIMUM LEVEL OF CURRENT ASSETS IS CALLED PERMANENT OR FIXED

WORKING CAPITAL AS THIS PART OF WORKING CAPITAL IS PERMANENTLY

BLOCKED IN CURRENT ASSETS. AS THE BUSINESS GROWS, REQUIREMENTS

OF PERMANENT WORKING CAPITAL ALSO INCREASE DUE TO INCREASE IN

CURRENT ASSETS.

i. Regular working capital:-

IT IS REQUIRED TO ENSURE CIRCULATION OF CURRENT ASSETS FROM

CASH TO INVENTORIES, FROM INVENTORIES TO RECEIVABLES AND FROM

RECEIVABLES TO CASH AND SO ON.

ii. Reserve Working Capital: -

IT IS THE EXCESS AMOUNT OVER THE REQUIREMENT FOR REGULAR

WORKING CAPITAL WHICH MAY BE PROVIDED FOR CONTINGENCIES THAT

MAY ARISE AT UNSTATED PERIODS, SUCH AS STRIKES, RISE IN PRICES,

DEPRESSION ETC.

Temporary or Variable Working Capital:

IT IS THE AMOUNT OF WORKING CAPITAL, WHICH IS REQUIRED TO MEET

SEASONAL DEMANDS AND SOME SPECIAL EXIGENCIES SUCH AS

LAUNCHING OF EXTENSIVE MARKETING CAMPAIGN FOR CONDUCTING

RESEARCH ETC.

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FACTORS DETERMINING THE WORKING

CAPITAL REQUIREMENTS

NATURE OR CHARACTERISTICS OF BUSINESS-THE WORKING

CAPITAL REQUIREMENTS OF AN ENTERPRISE ARE BASICALLY

RELATED TO THE CONDUCT OF THE BUSINESS. EVERY COMPANY

ACCORDING TO THEIR NATURE OF BUSINESS HAS TO MAINTAIN A

CERTAIN LEVEL OF WORKING CAPITAL.

PRODUCTION POLICY-THE PRODUCTION POLICIES PURSUED BY

THE MANAGEMENT HAS A SIGNIFICANT EFFECT ON THE

REQUIREMENTS OF WORKING CAPITAL OF THE BUSINESS. THE

PRODUCTION SCHEDULE HAS A GREAT INFLUENCE ON THE LEVEL

OF INVENTORIES. THE DECISION OF THE MANAGEMENT

REGARDING AUTOMATION, ETC., WILL ALSO HAVE ITS EFFECT ONWORKING CAPITAL REQUIREMENTS.

SEASONAL VARIATIONS-MOST FIRMS EXPERIENCE SEASONAL

AND CYCLICAL FLUCTUATIONS IN THE DEMAND FOR THEIR

PRODUCTS AND SEVICES. THESE BUSINESS VARIATIONS EFFECT

THE WORKING CAPITAL REQUIREMENT, SPECIALLY THE

TEMPORARY WORKING CAPITAL REQUIREMENT OF THE FIRM.WHEN THERE IS AN UPWARD SWING IN THE ECONOMY, SALES

WILL INCREASE; CORRESPONDINGLY, THE FIRMS INVESTMENT IN

INVENTORIES AND BOOK DEBTS WILL ALSO INCREASE. UNDER

BOOM, ADDITIONAL INVESTMENT IN FIXED ASSETS MAY BE MADE

BY SOME FIRMS TO INCREASE THEIR PRODUCTIVE CAPACITY. THIS

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ACT OF THE FIRM WILL REQUIRE FURTHER ADDITIONS OF

WORKING CAPITAL. WHEN THERE IS A DECLINE IN THE ECONOMY

SALES WILL FALL AND CONSEQUENTLY, LEVELS OF INVENTORIES

AND BOOK DEBTS WILL ALSO FALL.

CREDIT POLICY-A COMPANY WHICH ALLOWS LIBERAL CREDITS

TO ITS CUSTOMERS, MAY HAVE HIGHER SALES BUT WILL NEED

MORE WORKING CAPITAL AS COMPARED TO A COMPANY WHICH

HAS AN EFFICIENT DEBT COLLECTION MACHINERY AND

OBSERVING STRICT TERMS. THE WORKING CAPITAL

REQUIREMENTS CAN ALSO BE AFFECTED BY THE CREDIT

FACILITIES ENJOYED BY THE COMPANY.

RATE OF GROWTH OF BUSINESS-AS A COMPANY GROWS; IT IS

LOGICAL TO EXPECT THAT A LARGE AMOUNT OF WORKING

CAPITAL WILL BE REQUIRED. IT IS, OF COURSE, DIFFICULT TO

DETERMINE PRECISELY THE RELATIONSHIP BETWEEN THE

GROWTH IN THE VOLUME OF BUSINESS OF A COMPANY AND THE

INCREASE IN ITS WORKING CAPITAL. THE COMPOSITION OF

WORKING CAPITAL IN A GROWING COMPANY ALSO SHIFTS WITH

ECONOMIC CIRCUMSTANCES AND CORPORATE PRACTICES.

BUSINESS CYCLE-DIFFERENT PHASES OF BUSINESS CYCLE I.E,

BOOM, RECESSION, RECOVERY ETC. ALSO AFFECT THE WORKING

CAPITAL REUIREMENT. IN CASE OF BOOM CONDITION BUSINESS

ACTIVITIES EXPAND .AS A RESULT, THE NEED FOR CASH,

INVENTORIES ETC. INCREASES RESULTING IN MORE AND MORE

FUNDS BLOCKED IN THESE CURRENT ASSETS. IN CASE OF

RECESSION PERIOD, THERE IS USUALLY DULLNESS IN BUSINESS

ACTIVITIES AND THERE WILL BE AN OPPOSITE EFFECT ON THE

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LEVEL OF WORKING CAPITAL REQUIREMENT. THERE WILL BE A

FALL IN INVENTORIES AND CASH REQUIREMENTS ETC.

MANUFACTURING PROCESS/ LENGTH OF PRODUCT CYCLE-THE

MANUFACTURING PROCESS COMPRISES OF THE PURCHASE AND

USE OF RAW MATERIALS AND THE PRODUCTION OF FINISHED

GOODS. LONGER THE MANUFACTURING CYCLE, LARGER WILL BE

THE FIRMS WORKING CAPITAL REQUIREMENTS.

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WORKING CAPITAL CYCLE

The working capital cycle can be defined as:

THE PERIOD OF TIME WHICH ELAPSES BETWEEN THE POINT AT WHICH CASH

BEGINS TO BE EXPENDED ON THE PRODUCTION OF A PRODUCT AND THE

COLLECTION OF CASH FROM A CUSTOMER.

THE FASTER A BUSINESS EXPANDS, THE MORE CASH IT REQUIRES FOR

WORKING CAPITAL AND INVESTMENT. THE CHEAPEST AND BEST SOURCES

OF CASH EXIST AS WORKING CAPITAL RIGHT WITHIN BUSINESS. GOOD

MANAGEMENT OF WORKING CAPITAL WILL GENERATE CASH, WHICH WILL

HELP IMPROVE PROFITS AND REDUCE RISKS. BEAR IN MIND THAT THE COST

OF PROVIDING CREDIT TO CUSTOMERS AND HOLDING STOCKS CAN

REPRESENT A SUBSTANTIAL PROPORTION OF FIRMS TOTAL PROFITS.

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THERE ARE TWO ELEMENTS IN THE BUSINESS CYCLE THAT ABSORBS CASH:

INVENTORY(STOCKS AND WORK-IN-PROGRESS)

RECEIVABLES(DEBTORS OWING YOU MONEY)

THE MAIN SOURCES OF CASH ARE PAYABLES (YOUR CREDITORS) AND

EQUITY AND LOANS.

WHEN IT COMES TO MANAGING WORKING CAPITAL- TIME IS MONEY. IF YOU

CAN GET MONEY TO MOVE FASTER AROUND THE CYCLE (E.G. COLLECT

MONIES DUE FROM DEBTORS MORE QUICKLY) OR REDUCE THE AMOUNT OF

MONEY TIED UP (E.G. REDUCE INVENTORY LEVELS RELATIVE TO SALES),

THE BUSINESS WILL GENERATE MORE CASH OR IT WILL NEED TO BORROW

LESS MONEY TO FUND WORKING CAPITAL.

AS A CONSEQUENCE, YOU COULD REDUCE THE COST OF BANK INTEREST

OR YOULL HAVE ADDITIONAL FREE MONEY AVAILABLE TO SUPPORT

ADDITIONAL SALES GROWTH OR INVESTMENT. SIMILARLY, IF YOU CAN

NEGOTIATE IMPROVED TERMS WITH SUPPLIERS E.G. GET LONGER CREDIT

OR AN INCREASED CREDIT LIMIT; YOU EFFECTIVELY CREATE FREE FINANCE

TO HELP FUND FUTURE SALES.

FINANCING OF WORKING CAPITAL

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THERE ARE TWO TYPES OF WORKING CAPITAL REQUIREMENTS IN A

COMPANY-

I) PERMANENT OR FIXED WORKING CAPITAL REQUIREMENTS

II) TEMPORARY OR VARIABLE WORKING CAPITAL REQUIREMENTS

DEPENDING ON THE ABOVE MENTIONED REQUIREMENTS FOLLOWING ARE

THE SOURCES OF FINANCING WORKING CAPITAL-

SOURCES

Long Term Sources Short Term Sources

Shares Commercial Banks

Debentures Commercial paper

Public Deposits Trade Creditors

Loans from Financial inst. Installment credit

Accounts payables

Accrued Expenses

SOURCES OF WORKING CAPITAL

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DABURINDIA LIMITED AS A SUCCESSFUL COMPANY IN FMCG SECTOR HAS

THE FOLLOWING SOURCES AVAILABLE FOR THE FULFILLMENT OF ITS

WORKING CAPITAL REQUIREMENTS IN ORDER TO CARRY ON ITS

OPERATIONS SMOOTHLY.

BANKS:

THESE INCLUDE THE FOLLOWING BANKS:

Punjab National Bank

Standard Chartered Bank Ltd.

Hong Kong and Shanghai Banking Corp. Ltd.

State Bank Of India

HDFC Bank Ltd.

IDBI Bank Ltd.

Citibank

COMMERCIAL PAPERS:

COMMERCIAL PAPERS HAVE BECOME AN IMPORTANT TOOL FOR

FINANCING WORKING CAPITAL REQUIREMENTS OF A COMPANY.

COMMERCIAL PAPER IS AN UNSECURED PROMISSORY NOTE ISSUED BY THE

COMPANY TO RAISE SHORT- TERM FUNDS. THE BUYERS OF THE

COMMERCIAL PAPERS INCLUDE BANKS, INSURANCE COMPANIES, UNIT

TRUSTS AND COMPANIES WITH SURPLUS FUNDS TO INVEST FOR A SHORT

PERIOD WITH MINIMUM RISK.

Dabur India Limited issues Commercial Papers and had commercial worth Rs. 1000 lacs in

the year 2002-03.

WORKING CAPITAL ANALYSIS

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Working capital is one of the most difficult financial concepts to understand for the small-

business owner. In fact, the term means a lot of different things to a lot of different people.

By definition, Working Capital is the amount by which current assets exceed current

liabilities.

A useful tool for the small-business owner is the operating cycle. The operating cycle

analyzes the Accounts Receivable, Inventory and Accounts Payable cycles in terms of

days. In other words, accounts receivables are analyzed by the average number of days it

takes to collect an account. Inventory is analyzed by the average number of days it takes to

turn over the sale of a product (from the point it comes in your door to the point it is

converted to cash or an account receivable). Accounts payables are analyzed by the average

number of days it takes to pay a supplier invoice.

Most businesses cannot finance the Operating Cycle (accounts receivable days + inventory

days) with accounts payable financing alone. Consequently, working capital financing is

needed. This shortfall is typically covered by the net profits generated internally or by

externally borrowed funds or by a combination of the two.

Most businesses need short-term working capital at some point in their operations. For

instance, retailers must find working capital to fund seasonal inventory buildup between

September and November for Christmas sales. But even a business that is not seasonal

occasionally

experiences peak months when orders are unusually high. This creates a need for Working

Capital to fund the resulting Inventory and Accounts Receivable buildup.

Some small businesses have enough cash reserves to fund seasonal Working Capital needs.

However, this is very rare for a new business. If your new venture experiences a need for

short-term Working Capital during its first few years of operation, you will have several

potential sources of funding. The important thing is to plan ahead. If you get caught off

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guard, you might miss out on the one big order that could have put your business over the

hump.

Here are the five most common sources of short-term working capital financing:

Equity

Trade Creditors

Factoring

Line Of credit

Short-term Loans

Equity:

If your business is in its first year of operation and has not yet become profitable, then you

might have to rely on equity funds for short-term working capital needs. These funds might

be injected from your own personal resources or from a family member, friend or third-

party investor.

Trade Creditors:

If you have a particularly good relationship established

with your trade creditors, you might be able to solicit their help in providing short-term

working capital. If you have paid on time in the past, a trade creditor may be willing to

extend terms to enable you to meet a big order. For instance, if you receive a big order that

you can fulfill, ship out and collect in 60 days, you could obtain 60-day terms from your

supplier if 30-day terms are normally given. The trade creditor will want proof of the orderand may want to file a lien on it as security.

Factoring:

Factoring is another resource for short-term working capital financing. Once you have

filled an order, a factoring company buys your account receivable and then handles the

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collection. This type of financing is more expensive than conventional bank financing but

is often used by new businesses.

Line Of Credit:

Banks to new businesses do not often give Lines of credit. However, if your new business

is well capitalized by equity and you have good collateral, your business might qualify for

one. A line of credit allows you to borrow funds for short-term needs when they arise. The

funds are repaid once you collect the accounts receivable that resulted from the short-term

sales peak. Lines of credit typically are made for one year at a time and are expected to be

paid off for 30 to 60 consecutive days sometime during the year to ensure that the funds are

used for short-term needs only.

Short-term loan:

While your new business may not qualify for a line of credit from a bank, you might have

success in obtaining a one-time short-term loan (less than a year) to finance your temporary

working capital needs. If you have established a good banking relationship with a banker,

he or she might be willing to provide a short-term note for one order or for a seasonal

inventory and/or accounts receivable buildup.

In addition to analyzing the average number of days it takes to make a product (inventory

days) and collect on an account (account receivable days) vs. the number of days financed

by accounts payable, the operating cycle analysis provides one other important analysis.

From the operating cycle, a computation can be made of the dollars required to support one

day of accounts receivable and inventory and the dollars provided by a day of accounts

payable.

Working capital has a direct impact on CASH FLOW in a business. Since cash flow is the

name of the game for all business owners, a good understanding of working capital is

imperative to make any venture successful.

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The primary objective of working capital management is to ensure that sufficient cash is

available to:

Meet day-to-day cash flow needs;

Pay wages and salaries when they fall due;

Pay creditors to ensure continued supplies of goods and services;

Pay government taxation and providers of capital dividends; and

Ensure the long-term survival of the business entity.

Poor working capital management can lead to:

Over-capitalization (and therefore waste through under utilization of

resources and hence poor returns); and

Overtrading (trying to maintain a level of sales which is higher than

working capital can sustain for businesses which extend credit terms, more sales

means more debtors and higher working capital demands).

SWOT ANALYSIS

(Strengths, Opportunities, Weaknesses, and Threats)

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In any organization, strength and weaknesses indicate the capability and preparedness of

the organization to respond to the business opportunities likely to be available in the

environment and the extent to which it is able to use its strengths to neutralize the threats,

SWOT analysis is done for the purpose of generating a corporate plan. It is a macro level

process which has to be interpreted at different micro level like technical, financial, human

resource etc.

Strengths:-

1. Dabur india is the one of the famous consumer goods company in India

2. Dabur has completed almost 160 years.

3. One of the fastest growing company in ayurvedic and other personal care products

4. Maintaining good Customer Relationship globally.

5. Dabur india Ltd. is selling the many imported ayurvedic and life saving drugs

which increases the image of the company.

6. Strong foundation laid by top management.

7. Well developed R&D team

8. Organization improves the quality of product and service continuously.

9. Proper motivation programme to employees

10. Proper strategic decision.

11. Salary structure is good enough as compare to other pharmaceutical companies.

Weaknesses:-

1. Company does not give enough focus on existing product.

2. No grievance handling programme for employees.3. No strong pressure on Employees.

4. Inventory management is poor.

Opportunities:-

1. Dabur India ltd. is introducing more ayurvedic and other personal products so in

this segment growth is very high.

2. R & D is bringing lots of new molecules which can grave market share.

3. 49 patent applications after getting approved will make Dabur patent holder.

4. Can remove the paper work and can start online paper work.

Threats:-

1. Employee turnover.

2. New Technology.

3. Government Policies.

4. Quality of products.

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5. Natural calamities

COMPETITORS

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MARICO LTD.

Marico groups history can be traced back to 1862 when Kanji Morarji, started a small

trading business in Mumbai. The family set up the Bombay Oil Industries Ltd (BOIL) in

1948 with manufacturing facilities in Mumbai for coconut oil extraction plant, vegetable

oil refinery and a chemical plant. Marico was incorporated in 1988 to take over the then

40-year old consumer products business of BOIL. The division was engaged in marketing

of coconut oil, edible oil, instant starch, fruit jams etc Earlier the brands of Saffola and

Parachute were owned by Bombay Oil Industries Limited and Marico was given access to

use these brands for perpetuity. In FY00, the brands were transferred to the company for a

consideration of Rs300mn.Marico has 5 factories, located at Sewree in Mumbai, Jalgaon in

Maharashtra, Palakkad in Kerala, Saswad in Pune and Ponda in Goa.

Marico is the market leader in the hair oil segment, with its Parachute and Hair & Care

brands. It is also one of the leading players in the branded edible oil segment with strong

brands like Saffola and Sweekar. Besides hair and edible oil, the company has a presence

in niche segments like Instant Starch (Revive), Anti lice shampoo (Mediker) and food

products like jams and sauces (Sil). Marico also has a fee based marketing arrangement

with Procter & Gamble (P&G) for marketing a few P&G brands through its own network.

Parachute, Saffola and Sweeker are the key earnings drivers, contributing to almost 80% of

Maricos turnover.

Fast moving consumer goods (FMCG) business is built on the two pillars of brand equity

and distribution network. Brand equities are built over a period of time by consistent high

quality and aggressive advertisement and marketing. Availability near the consumer

through a wide distribution channel is another crucial success factor, as products are small

value, frequently purchased, daily use items. Competition is intense, and players have to

remain cost effective and provide value for money to consumers to retain market shares.

The company is, at present, highly dependent on its three main brands -- Parachute, Saffola

and Sweekar. The growth in this category will be difficult to sustain in the longer run due

to increasing competition. Recently, Hindustan Lever acquired Cococare (it already has

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Nihar under its fold), which will see an intensification of competition in the coconut oil

category.

Marico has maintained Parachute market share despite severe competition. New edible oil

products are launched with 'Good for Health' positioning under the Saffola brand and

catering to regional taste requirements through the Sweekar franchise. In the hair oil

segment, the company has successfully launched value added Parachute variants. A new

brand Shanti Amla, in the amla hair oil category dominated by Dabur, has been launched

during FY02 and has been extremely successful.

HINDUSTAN LEVER LTD.

Three Unilever companies were merged in 1956 to form HLL. These companies were

Hindustan Vanaspati Manufacturing Company -edible oil (established in 1931), LeverBrothers India Limited- soaps (1933) and United Traders-personal products (1935). Ponds

joined the Unilver fold through a global acquisition in 1986. In the last decade, HLL has

expanded its operations by the merger and takeover route. It acquired TOMCO a Tata

group company (1993), merged Unilever group companies Brooke Bond Limited (1996)

and Ponds' India (1998), and has acquired cosmetic business of another Tata group

company Lakme (1998).

Hindustan Lever Limited is the largest FMCG Company in the country, with a turnover of

Rs118bn. The companys business sprawls from personal and household care products to

foods, beverages and specialty chemicals. The company has a dominating market share in

most categories that it operates in such as toilet soaps, detergents, skincare, hair care, color

cosmetics, etc. It is also the leading player in food products.

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HLL is the market leader in the detergent and toilet soap industry with market share of 60%

and 40% respectively. HLLs turnover has now grown to Rs118bn, with soaps and

personal products contributing 57% to turnover and beverages and food products

contributing to 29% of turnover.

In 2001, soaps business (Rs21bn) grew by 1% and detergent sales (Rs20bn) grew by 7%.

Other personal products (household care, oral acre, skin care, hair care, color cosmetics)

registered a 14% growth to Rs24.6bn. Expansion of the foods business, which has been

identified as a major growth area, has not been as fast as anticipated. Beverage sales move

largely with commodity price trends, which have remained on a downtrend.

Britannia Industries Ltd.

Britannia was incorporated in 1918 as Britannia Biscuits Co Ltd in Calcutta. In 1924, Pea

Frean UK acquired a controlling stake, which later passed on to the Associated Biscuits

International (ABI) a UK based company. During the 50s and 60s, Britannia expanded

operations to Mumbai, Delhi and Chennai. In 1987, Nabisco, a well known European food

company, acquired ABI. In 1989, J M Pillai, a Singapore based NRI businessman along

with the Groupe Danone acquired Asian operations of Nabisco, thus acquiring controlling

stake in Britannia. In 1977, the Government reserved the industry for small scale sector,

which constrained Britannia's growth.

Britannia's controlling stake is jointly with Groupe Danone and Nusli Wadia. Groupe

Danone is one of the leading players in the world in bakery products business. It acquired

interest in Britannia Industries in 1989 and acquired controlling stake in 1993.Nusli Wadia

group is one of the leading industrial houses in the country, with interests mainly in textiles

and petrochemicals.

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Britannia's plants are located in the 4 major metro cities - Kolkatta, Mumbai, Delhi and

Chennai. A large part of products are also outsourced from third party producers. Dairy

products are out sourced from three producers - Dynamix Dairy based in Baramati,

Maharashtra, Modern Dairy at Karnal in Haryana) and Thacker Dairy Products at Howrah

in West Bengal.Britannia is the market leader in the organized biscuit and bakery product

market in India. Biscuits contribute to more than 80% of Britannia's total turnover. Other

products include bread and cakes. Britannia diversified into dairy products in 1997 with

processed cheese.

The entry of new MNCs has not posed a direct threat to Britannia, as these MNCs have

positioned their brands in the premium/health segment. Britannia has maintained marketleadership with a 40% volume share and 48% value market share in the organized sector.

FMCG major HLL is expected to venture into the segment. Britannia has been aggressive

in new launches and marketing during the last 2 years anticipating the competition. It has

also recently acquired Kwality Biscuits, gaining a strong foothold in the southern market.

Nestle India Ltd.

Nestle was promoted by Nestle Alimentana, Switzerland, a wholly owned subsidiary of

Nestle Holdings Ltd., Nassau, Bahama Islands. Nestle is one of the oldest food MNC

operating in India, with a presence of over a century. For a long time, Nestle Indias

operations were restricted to importing and trading of condensed milk and infant food.

Over the years, the Company expanded its product range with new products in instant

coffee, noodles, sauces, pickles, culinary aids, chocolates and confectionery, dairy products

and mineral water.

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Nestle was incorporated as a limited company in 1959. Nestle S A Switzerland, is one of

the leading companies in the global foods industry. The principal activities of the group

encompass beverages (with Nescafe as the flagship brand), milk products, processed foods,

cooking aids, bakery products, chocolates, confectioneries, pharmaceutical products

(ophthalmic, surgical instruments etc).

Nestle has a presence in 83 countries worldwide. It has a total number of 509 factories out

of which 220 are located in Europe, 153 in America and 136 in Africa, Asia and Oceania.

Nestle started its manufacturing operations with Milkmaid in 1962 at Moga factory.

Manufacturing of Nescafe started in 1964 at the same factory. The company set up another

factory at Cherambadi in Tamil Nadu, for manufacture of infant foods, coffee etc. The

company set up its Nanjangad (Karnataka) factory in 1989 and the Samlakha (Haryana)factory in 1992. The Ponda (Goa) factory started operations in 1995.

The Company set up its sixth manufacturing unit in 1997 at Bicholim in Goa.

Nestl India manufactures products of truly International quality under brand names such

as MILKMAID, EVERYDAY, CERELAC, LACTOGEN, MAGGI, NESCAFE,

NESCAFE SUNRISE, NESTEA, MILO, KITKAT, MILKY BAR, MUNCH, POLO,NESTLE MILK, NESTLE DAHI, NESTLE FRUIT N MILK and NESTLE FRUIT N

DAHI.Nestle registered robust profit growth of 46% to Rs1.73bn in 2001. Profit would

have been higher but for the additional costs associated with the new businesses of water,

liquid milk and chilled dairy products. Sales rose by 14.5% to Rs19.21bn. Domestic sales

grew by 14.1% to Rs16.11bn. Exports, contributing 16% to turnover, increased by 16.7%

to Rs3.1bn. 74% of the exports continue to be to its key market Russia. The company

has also reported a strong 55% growth in net profit in 2001.Sales have registered a 17.4%

growth mainly driven by higher domestic sales in the chocolate and culinary product

segments.

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Cadbury India Ltd.

Cadbury was originally incorporated as a wholly owned subsidiary of Cadbury Schweppes

Overseas Ltd (CSOL) in 1948. The companys original name was Cadbury Fry (India)

Ltd.In 1982; the name was changed to Hindustan Cocoa Products. The current name was

restored in Dec 89. In 1986, Cadbury forayed into biscuits with Cadbury Butter, Glucose

and Bournvita brands. The business however, could not take off and was discontinued 3-4

years later. In 1989, Cadbury diversified into ice creams with Dollops and Lopstop brands,

which were sold off to Brooke Bond in 1994.

Cadburys manufacturing operations started in Mumbai in 1946, which was subsequently

transferred to Thane. The company, way back in 1964, pioneered cocoa farming in India to

reduce dependence on imported cocoa beans. In 1977, the company also took steps to

promote higher production of milk . In 1995, Cadbury expanded Malanpur plant in a major

way. The Malanpur plant has modernized facilities for Gems, Eclairs, and Perk etc.

Cadbury has been losing market share, but continues to dominate the chocolate market withabout 65% market share. Nestle has emerged as a significant competitor with about 24%

market share Cadbury reported sales of Rs6.26bn in 2001.

The Cadbury management has been unable to achieve the volume growth targets set during

the last two years. The company remains dependent on a single category Chocolates to

drive growth.

COMPARISON OF WORKING CAPITALS OF DIFFERENT

COMPANIES

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(Amt In Rs. Millions)

Company Name F/Y Current

Assets

Current

Liabilities

Net Working

Capital

Dabur India Ltd. 2004-05 251.971 322.222 -70.25

Britannia Industries

Ltd.

2003-04 2399.61 2356.68 42.93

Hindustan Lever Ltd. 2002-03 38788.80 39802.49 -1013.69

Marico Industries Ltd. 2003-04 1917.21 1066.10 851.11

Cadbury India Ltd. 2002-03 2175.90 1352.40 823.50

Nestle India Ltd. 2003-04 5512.44 8100.8 -2588.36

WORKING CAPITAL GRAPHS

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The above chart displays the working capital scenario at Dabur

IndiaLtd. Dabur has been constantly reducing its working capital and

in the year 2003-2004 a steep decline has taken place in the companys

working capital, reducing it to a negative of Rs.-243.99 millions. This

has proved the managerial efficiency at Dabur in its Finances.

The company has reduced its payment period from 39 days to a negative

of 5 days, which shows that the company has enough of funds available

on credit from its suppliers, and is collecting money from its debtors at a

faster pace to avoid much of the bad debts.

72

-243.99

1867.31

2384.94 2300.77

2975.98

-500

0

500

1000

1500

2000

2500

3000

2004 2003 2002 2001 2000

Working Capital Of Dabur India Ltd.

823.5

1307.71079.83

941.34

638.47

0

500

1000

1500

2003 2002 2001 2000 1999

Working Capital Of Cadbury India Ltd.


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The above graph displays the working capital for various years of

CadburyIndiaLtd. The working capital of this company has been

constantly increasing except for the year 2002-2003 where it hasdeclined. This shows that Cadbury India Ltd. has lots of cash blocked

in the form of current assets. Hence because of it the working capital

of the company is positive and high.

The company needs to strengthen its cash policies and reduce its

money being blocked in the current assets. Also by decreasing the

payment period the company can improve upon the working capital.

73

-1,013.69

300.96

1,714.39

-3,733.77

1,872.48

-4,000.00

-2,000.00

0.00

2,000.00

2003 2002 2001 2000 1999

Working Capital Of Hindustan LeverLtd.


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The above graph displays the working capital scenario of Hindustan

LeverLimited the largest FMCG Company in the world. The company

has been having an enormous cash reserves for planning out its future

investments. The working capital has been almost nil and negative since

the past few years, showing that the company has an excellent and well

planned finances.

A company with a negative working capital has a faster collection period

and a slower payment period.

Through this managerial efficiency the company is able to generate good

profits and pay off good dividends to its shareholders, thereby keeping

them happy.

Britannia Industries Ltd. working capital was on an increasing step

since 2000 till 2003, when finally the company realized it had to do

74

42.93

746.65

592.21

256.96

51.57

0

200

400

600

800

2004 2003 2002 2001 2000

Working Capital Britannia IndustriesLtd.


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something to control its blockage of free cash in the current assets.

Thereby through its managerial skills and efficient functioning the

company reduced its working capital from Rs 746.65 crores in 2002-

2003 to Rs 42.93 crores in financial year 2003-2004, a decline of almost

94%.

The above graph displays the working capital of Nestle IndiaLtd.,

which has been negative sine the year 2000-2001.

75

Working Capital Of Nestle India Ltd.

-2588.36

-1388.53

-743.81

-317.74

-745.12

-3000

-2500

-2000

-1500

-1000

-500

0

2004 2003 2002 2001 2000


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In the financial year 2003-2004 the working capital of the company

was Rs 1388.53 millions and in the year it 2003-2004 it further

declined to Rs 2588.56 millions, i.e. its working capital almost

doubled from 2003 to year 2004.

A brilliant and efficient; working and managerial scenario is depicted

through the working capital of the company.

The graph shown depicts the working capital from year 2000-2004 for

MaricoIndustriesLtd. another renowned FMCG Company.

The working capital of the company has been increasing continuously,showing that the company is blocking its cash available in the current

assets or is incurring large bad debts. The management of the company

needs to look into the matter and improve upon the working capital.

76

851.11 827.67

594.86466.88 494.22

0

200

400

600

800

1000

2004 2003 2002 2001 2000

Working Capital Of Marico Industries

Ltd.


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All the above graphs show that how the company manages its funds to secure top

position in the world. This is what Dabur India has done. By bringing down its working

capi

gagan bhardwaj dav

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