7/29/2019 Kavita SRF Fincine Company FINAL
1/43
[1]
A
PROJECT REPORT
On
WORKING CAPITAL MANAGEMENT
SRF LIMITED, MALANPUR GWALIOR
FOR THE PARTIAL FULFILLMENT OF BACHELOR OF BUSINESS
ADMINISTRATION
(2011-2013)
Submitted To Submitted byKAVITA PACHORI
M.B.A III Semester
JIWAJI UNIVERSITY, GWALIOR
7/29/2019 Kavita SRF Fincine Company FINAL
2/43
[2]
DECLARATION
I am Kavita Pachori student of M.B A III SEM. JIWAJI UNIVERSITY, GWALIOR,
hereby declare that the project report entitled WORKING CAPITAL
MANAGEMENT is an Authentic and genuine bona fide work done by me under the
supervision of Mr. Santosh Pathak (Manager) at SRF Limited Malanpur (MP).The
empirical findings in this report are based on imperative information assembled at SRF
Ltd.
Kavita Pachori
M.B.A III Sem
7/29/2019 Kavita SRF Fincine Company FINAL
3/43
[3]
ACKNOWLEDGEMENT
This thesis is great source of learning, a good experience as it made me aware of
professional culture and conducts that exist in the industry.
Though at the onset of any ambitious thesis one always encounters certain difficulties in
the beginning, however, overcoming these difficulties, completing the thesis as well as
making it a success greatly depends on the encouragement, inspiration. For completion of
this thesis various people have put lot of efforts.
I would like to thank HOD ----------------------------- (Jiwaji University, Gwalior) for
giving me an opportunity to do thesis on WORKING CAPITAL MANAGEMENT in
SRF Limited. I would like to express my gratitude to Prof. Surya Prakash Parashar,
(Asst. Prof. SRCEM), Mr. VIVEK VAJPAYEE , Mr. SANJAY KAPOOR (Senior
Executive) for his continuous inspiration, guidance and valuable suggestion that helped
me in every step.
Kavita Pachori
MBA III Sem.
7/29/2019 Kavita SRF Fincine Company FINAL
4/43
[4]
PREFACE
This report has been prepared towards the partial fulfillment of curriculum M.B.A. This
research is on the topic of WORKING CAPITAL MANAGEMENT OF SRF
LIMITED Although I had tried my level best to prepare this report an error free report
every effort had been made to offer the most authenticate position with accuracy. The
research provides an opportunity to a student to demonstrate application of his/her
knowledge, skill and competencies required during the technical session. Research also
helps the students to devote his/ her skill to analyse the problem to suggest alternative
solutions, to evaluate them and to provide feasible recommendations on the provided
data. This topic emphasize the importance of training need identification we can focus on
the following areas if training will make a difference in productivity and the bottom line,
decide what specific training each employee needs and what will improve his or her job
performance, To differentiate between the need for training and organizational issues and
bring about a match between individual aspirations and organizational goals.
7/29/2019 Kavita SRF Fincine Company FINAL
5/43
[5]
CONTENTS
COMPANY PROFILE About SRF
Milestone
Theoretical Aspect
Practical Aspect
INTRODUCTION TOPIC
Working Capital management
RESEARCH METHODOLOGY
Definition
Types of research
Data collection method
Primary data
Secondary data
Sample
Sampling method
DATA ANALYSIS & GRAPHICAL PRESENTATION
FINDINGS
SUGGESTION
CONCLUSION
BIBLIOGRAPHY
QUESTIONNAIRES
7/29/2019 Kavita SRF Fincine Company FINAL
6/43
[6]
COMPANY PROFILE
The SRF Group
The Rs 980 crore SRF Group is an Indian market leader in industrial yarn and
fabric as well as refrigerant gases. Since its inception in 1974, the SRF Group has
emerged as an industrial major in its core business areas, which has about 2,500
employees operating out of 14 locations in India, UAE and USA.
In its Industrial Synthetics Business, which manufactures Nylon Tyre Cord
Fabric, it is the 7th largest producer in the world. The Chemicals Businessmanufacturers refrigerant gases used by customers in around 45 countries. Its
Industrial Fabrics business is reputed for its high quality fabrics used for non-
tyre applications in the international and domestic market. In its Information
Technology Business (ITB), SRF is offering high quality Business Process
Outsourcing (BPO) solutions to international customers.
In 2001, SRF Ltd. de-merged three smaller businesses that manufacture
Engineering Plastics, Fishnet Twines and Polyester Films into a separate
company - SRF Polymers Ltd. This restructuring is a move towards a more
focused business portfolio, which will help spearhead growth.
At SRF, our vision is to build a world class, knowledge-driven, customer-
oriented and process-based organisation that is committed to complete customer
satisfaction, high returns for its investors, improved quality of life for its people
and being an ideal corporate citizen. SRF and its people are guided by certain
values and principles in their approach to work and their dealings with others.
These principles are classified as work-related and people-related.
7/29/2019 Kavita SRF Fincine Company FINAL
7/43
[7]
People-related Principles Work-related Principles
Create a win/win situation for all
stakeholders
Leadership by example
Self discipline
Participation by all
Continuing education for all
Focus on Quality, not short-term
profits
Market in, not product out
Be customer oriented
Work with facts and data
Act on causes, not just phenomena
Be process oriented
Prioritize
SRF PURPOSE
To be an inspired, caring and joyous organization
To create extraordinary value for all
To pursue excellence and customer loyalty
To always meet tomorrow's challenges today
SRF VALUES
To trust and be trustworthy
Show respect and care for each individual
Foster creativity and innovation
Live by high standards of ethics and integrity
Avoid all discrimination
Contribute to the benefit of society
7/29/2019 Kavita SRF Fincine Company FINAL
8/43
[8]
SRF VISION
To be one of the most admired business organizations in India,
deeply loved by its people, respected and sought after by its
customers and shareholders.
To be World Leader in at least one of its businesses with global
operations and technology leadership.
To be one of the most sought after employers in the country. A
Company known for its people management skills. One that can
unlock the talent hidden in employees and inspire them to take on
and accomplish extraordinary future challenges. Its employeesmust be amongst the best paid in the country.
To establish an outstanding track record of shareholder value
creation by 2005.
To be a shining example of deep commitment and contribution to
development of people and society.
SRF MISSION
Enable customer satisfaction of a high level and a standard higher
than that of competitors.
Provide good returns to our shareholders and other financial
stakeholders.
Continuously enhance the total quality of life of our employees and
help them realize their potential.
Contribute to the development of the society and the nation.
7/29/2019 Kavita SRF Fincine Company FINAL
9/43
[9]
SRF STRENGTHS
The company has a very strong brand image in the trade market and is perceived
to be the best in its product market segments.
All major OEMs use SRFs fabric for their soft-top vehicles.
The companys fabrics have been approved for defense and navy
applications.
The companys products are also used in niche markets like sport
goods, ducting and pitch covers. All the major cricket grounds in
Asia and Middle East are covered by SRF tarpaulins.
To strengthen quality, the company adopted TQM practices.
World standards achieved in manning.
The company achieved a significant presence in the US tarpaulin
market.
QUALITY POLICY
To maintain market leadership in tyre cord in the country and to make their
presence stronger in the global market, SRF Ld. (ISB-G) aim at excellence in the
quality of products and customer delight beyond contractual obligations.
To accomplish this, the company is committed to implement and follow Quality
Management System as per ISO 9002 and strive for continuous quality
improvement through team work and motivation at all levels preserving ecology
and environment.
7/29/2019 Kavita SRF Fincine Company FINAL
10/43
[10]
TOTAL QUALITY MANAGEMENT
At SRF, Total Quality Management is a management approach that profoundlyintegrates principles, methods, systems and tools, and transforms the way people
in the organization think and do things, as well as the way in which they manage
it.
Because of TQM, SRF has made fundamental improvements in all areas. This in
turn has meant satisfied stakeholders, which is the true meaning of a win-win
approach.
The TQM journey at SRF is characterized by three key methods of management.
* Daily Management which is a means to preserve status quo and make
continuous improvements.
* Breakthrough Management which provides a method for making
quantum improvements or breakthroughs.
* Upstream Management - which prevents potential problems from
arising at the production stage and creates products that satisfy
customers.
SRF COMMITMENTS
SHAREHOLDERS:
High growth and profitability, risk reduction, good governance.
Perform: Productivity, scalability, de-risking and profitability.
Conform: Adherence to corporate governance code.
7/29/2019 Kavita SRF Fincine Company FINAL
11/43
[11]
Inform: Sharing of information with shareholders and other
investors.
PEOPLE:
Experience: Joy, culture, pride, camaraderie, challenge.
Learning: Training and development to enhance skills, knowledge
and personality.
Contributing: Opportunity for meaningful and challenging work.
Growing: Growth in responsibilities and quality of life.
CUSTOMERS:
Value Preposition superior to benchmark competition in terms of
Quality, Cost, Delivery.
SOCIETY:
Compliance: with laws of the country and being a good corporatecitizen.
Welfare: contributing to the well being of the society we live in.
Environment: care and protection of communities around our
workplace.
SRF STRATEGIES
In the Industrial Synthetics Business, the company, a domestic
leader with more than 40 % market share, is now seeking to
consolidate Asian capacities by acquisitions and alliances, to
emerge as an Asian leader.
7/29/2019 Kavita SRF Fincine Company FINAL
12/43
[12]
In Industrial Fabrics Business the company is striving to build on
its dominance in the Indian market where its market share ranges
between 75-100% in various product segments. While it will
continue efforts to retain this dominant position at home, it is also
exploring export markets in the US and Europe where it has
already made some headway, emerging as the fifth largest player
in the world in Belting Fabrics, riding on the back of its
relationships with the world leaders in Conveyor Belting. The
objective is to emerge as cost-competitive global suppliers to these
leading companies.
In the Chemicals Business, where SRF is the Indian market leader
with a market share of more than 40%, the company is seeking to
consolidate on this by building its distribution networks and
moving into the new-age replacement gases as some of its existing
products are phased out under the Montreal Protocol. The
company will also seek to focus on the after-market in these
products, both in India and some countries of Asia. It is also
exploring the possibility of engaging in Contract Manufacture of
Custom Synthetics of Chemicals.
In the IT Business, SRF is providing high quality Business Process
Outsourcing (BPO) services to international customers. Currently,
the company is providing outsourcing in the areas of Healthcare,
Finance & Accounts and Opportunistic Data Mining.
7/29/2019 Kavita SRF Fincine Company FINAL
13/43
[13]
GROWTH PLANS
The company is now structured into four separate businesses:
A) Industiral Synthtics Business:
SRF is a domestic leader in this business with more than 40% market share. This
seeks to consolidate Asian capacity, by acquisitions and alliances, to emerge as
an Asian leader. For the moment, they are seeking to protect their turf in India
and would seek any capacity in Asia that would be available.
B) Industrial Fabrics Business:
They are a dominant player in India, with market share ranging from 75% to
100% in their entire product segment. They seek to retain this position, and
explore export markets in the US and Europe. They have made some headway,
emerging as the fifth largest player in the world in Belting Fabrics, riding on the
back of their relationship with world leaders in
Conveyor Belting. They now seek to emerge as cost-competitive global suppliers
to these companies.
C) Chemicals Business:
They are market leader in India, with a market share of more than 40%. They
seek to consolidate on this, build their distribution networks, move into the new-
age replacement gases as some of their existing products are phased out under
7/29/2019 Kavita SRF Fincine Company FINAL
14/43
[14]
the Montreal Protocol, and retain market leadership in those products, both in
India and some countries of Asia.
They are also exploring the possibility of emerging in Contract Manufacture of
Custom Synthesis of Chemicals.
D) IT Enabled Service Business:
They are testing the waters in this business. They feel that there are lot
opportunities in Business Process Outsourcing and are looking at opportunities
in the Medical Billing space.
SRF MILESTONES
1970 Incorporation of the Company
1974 Commissioning of Nylon Tyre Cord Fabric plant at Chennai
1977 Introduction of Fishnet Twines at Chennai
1979 Introduction of Nylon Engineering Plastics at Chennai
1981 Commissioning of Chafer and Belting Fabrics project at Tiruchirapalli,
Tamil Nadu
1985 1] Takeover of Shriram Bearings Ltd., and Shriram Needle Bearing
Industries Ltd.
2] Commissioning of Industrial Fabrics Plant at Tiruchirapalli
3] Substantial expansion of Nylon Tyre Cord Fabric capacity at Chennai
1986 1] Commissioning of Coated Fabrics project at Tiruchirapalli2] Commencement of commercial production at SRF Nippondenso Ltd.
3] Commencement of operations at SRF Finance Ltd.
1989 Commencement of commercial production of Florochemicals at
7/29/2019 Kavita SRF Fincine Company FINAL
15/43
[15]
Bhiwadi, Rajasthan
1993 Adoption of Total Quality Management (TQM)
1994 1] Divestment of equity in SRF Nippondenso Ltd.
2] Commencement of Halon production based on in-house R&D at
Bhiwadi
3] Commencement of operations at SRF International Ltd.
1995 1] Acquisition of Ceat's Nylon Tyre Cord & Fabrics plant at Gwalior,
Madhaya Pradesh
2] Commencement of Chloromethanes production at Bhiwadi towardsbackward integration for Fluorochemicals Incorporation of SRF
Americas Inc.
3] Commencement of Vision Care Project at Bangalore
1996 Commencement of Tyre Cord Fabric production at SRF Overseas plant
in Dubai
1997 Divestment of equity in SRF Finance Ltd.
1998 1] Divestment of Ophthalmic Lenses business
2] Closure of SRF International Ltd.
3] Equity rights issue taken out of Rs 43 crore
1999 1] Acquisition of DuPont Fibers Ltd, subsequently renamed Nylon
Tyrecord Fabric Ltd.
2] ISO 9000 certification awarded to all SRF plants
2000 Divestment of Shriram Bearings Ltd. and Shriram Needle Bearing
Industries Ltd.
2001 Capacity of Nylon Tyre Cord Fabrics doubled, SRF becomes 7th largest
merchant manufacturer in the world.
7/29/2019 Kavita SRF Fincine Company FINAL
16/43
[16]
2002 1] Merger of Tyrecord Fabric Ltd. with SRF Ltd.
2] Polyster Films, Fishnet Twines and Engineering Plastics businesses
spun off a separate entity SRF Polymers Ltd.
LOCATIONS
7/29/2019 Kavita SRF Fincine Company FINAL
17/43
[17]
ABOUT THE PLANT
This plant was established in 1990 as Tyre Cord Division of CEAT LIMITED. It
was largely funded by debt, which initially strained the company, but latervarious policies helped it to recover from it and emerge as a domestic leader with
market share exceeding 40 %. It was set up in collaboration with M/s Toray
Industries, Japan. Full care was taken with respect to quality during
procurement, erection and commissioning of the plant. The commercial
production started in March 1993. With the endless efforts of the employees,
benchmark level quality was achieved from day one and the product was well
accepted in India as well as in the global market, within a short span of one year.
This unit was acquired by M/s SRF LIMITED on the midnight of 8th /9th Feb
1996. The acquisition was a watershed. Consequently the name of the company
has been changed to SRF LIMITED. The company got ISO-9002 certificate on
Sept. 1st 1995. Recently it has got ISO-14000 (Environment Management System )
certificate which means that work procedure and processes in plant are safe and
environment friendly.
Malanpur plant has got one of the sharpest profiles in the world in terms of
input-output ratio, raw materials, process productivity and operating profit etc.
The ISB-G plant is fully integrated with facilities for producing Nylon Chips both
conventional and Spin draw, Yarn and Fabrics. Business of industrial synthetics
constitutes the largest part of SRF portfolio and will continue to grow rapidly.
As a leading Indian producer of Nylon 6 tyre cord SRF now accounts for over
40% of the domestic demand for tyre cord. Tyre cord fabric is a griege fabric
made from tyre yarn and dipped fabric converted from griege fabric, which has
applications as reinforcement material for making all kinds of tyres. The ISB-G
7/29/2019 Kavita SRF Fincine Company FINAL
18/43
[18]
plant has the capacity of producing tyre cord fabric to the extent of 8500tpa per
year.
There is realization at SRF that industrial activity needs to preserve and work for
Environment and Ecology. The ISB-G plant has also given equal importance toboth. Following steps have been taken to preserve and enrich the environment
and ecology at SRF Ltd., Malanpur :-
Technology selected which is less polluting. Training people and creating full awareness in this direction. Pollution control is considered a social need instead of legal
requirement.
Integrated facility for Effluent Treatment and its monitoring. In house facility for Ambient and Stack monitoring. Biogas plant installed for safe disposal of canteen waste. Extensive tree plantation. There is 100% recycle of Effluent towards horticulture.
The ISB-G, Malanpur is supposed to achieve DEMING AWARD by 2004.
7/29/2019 Kavita SRF Fincine Company FINAL
19/43
[19]
ISB-G, MALANPUR AT A GLANCE
LOCATION
MALANPUR INDUSTRIAL AREA
MALANPUR, DIST. BHIND (M.P.) 22K.M.FROM GWALIOR
START- UP YEAR 1993
TECHNICAL COLLABORATER M/S TORAY IND. (JAPAN)
QUALITY ACCREDITATION ISO 9002 & ISO 14001
TOTAL AREA 73 ACRES
TOTAL INVESTMENT RS. 350 CRORES
MANPOWER
WORKMEN
STAFF
SUPERVISOR & ABOVE
316
63
61
TOTAL 440
CAPACITY (TPA)
NYLON-6 TYRE CORD CHIPS
NYLON-6 TYRE CORD YARN
NYLON-6 TYRE CORD FABRIC
10500
11000
8500
UTILISATION 98%
7/29/2019 Kavita SRF Fincine Company FINAL
20/43
[20]
OBJECTIVE OF RESEARCH
Understand the Performance management and appraisal process of the
Company.
Understand and to successfully implement the Division of Personnels
Employee Working capital System.
Improve two way communication between supervisor and employees.
Elucidate tasks, goals, responsibilities, priorities and expectations.
7/29/2019 Kavita SRF Fincine Company FINAL
21/43
[21]
INTRODUCTION TOPIC
7/29/2019 Kavita SRF Fincine Company FINAL
22/43
[22]
CONCEPTUAL FRAMEWORK
WORKING CAPITAL
Working capital, also known as "WC", is a financial metric which represents
operating liquidity available to a business. Along with fixed assets such as plant andequipment, working capital is considered a part of operating capital. It is calculated as
current assets minus current liabilities. If current assets are less than current liabilities,
an entity has a working capital deficiency, also called a working capital deficit. Net
working capital is working capital minus cash (which is a current asset). It is a
derivation of working capital that is commonly used in valuation techniques such as
DCFs (Discounted cash flows).
A company can be endowed with assets and profitability but short of liquidity if its
assets cannot readily be converted into cash. Positive working capital is required to
ensure that a firm is able to continue its operations and that it has sufficient funds to
satisfy both maturing short-term debt and upcoming operational expenses. The
management of working capital involves managing inventories, accounts receivable
and payable and cash.
Definition:-
According to Guttmann & Dougall-
Excess of current assets over current liabilities.
According to Park & Gladson-
The excess of current assets of a business (i.e. cash, accounts receivables, inventories)
over current items owned to employees and others (such as salaries & wages payable,
accounts payable, taxes owned to government).
Capital Structure
Capital Structure refers to the composition of the long-term sources of funds. It includes
equity capital including retained earnings and long-term debts. Thus, short-term liabilities
should be excluded from the formulation of capital structure.
In a simple way, capital structure is used to represent the proportionate relationship
between debt and equity. A firms capital structure is then the composition or structure of
7/29/2019 Kavita SRF Fincine Company FINAL
23/43
[23]
its liabilities. The capital structure of a company essentially describes the financing of the
company. This can be viewed through the right side of the balance sheet which displays
liabilities and shareholders equity. Many different firms of analysis, through many
different financial ratios, can be performed gauge near term and long term financial
health of the company.
Definitions:
According to Nemmers and Grunewald, Capital structure refers to all the financial
resources marshaled by the firm, short as well as long term, and all forms of debt as well
as equity.
According to Gerestenbeg, Capital structure of a company refers to the composition or
make-up of its capitalization and it includes all long-term capital resources viz: loans,
reserves, shares and bonds.
PROFITABILITY (EBIT)
An indicator of a company's profitability, calculated as revenue minus expenses,
excluding tax and interest. EBIT is also referred to as "operating earnings", "operating
profit" and "operating income", as you can re-arrange the formula to be calculated as
follows:
EBIT = Revenue - Operating ExpensesAlso known as Profit Before Interest & Taxes (PBIT), and equals Net Income with
interest and taxes added back to it.
In other words, EBIT is all profits before taking into account interest payments and
income taxes. An important factor contributing to the widespread use of EBIT is the way
in which it nulls the effects of the different capital structures and tax rates used by
different companies. By excluding both taxes and interest expenses, the figure hones in
on the company's ability to profit and thus makes for easier cross-company comparisons.
EBIT was the precursor to the EBITDA calculation, which takes the process further by
removing two non-cash items from the equation (depreciation and amortization).
REVIEW OF LITRATURE
7/29/2019 Kavita SRF Fincine Company FINAL
24/43
[24]
Hyun-Han Shin and Luc Soenen (1998) has done a study on Efficiency of
Working Capital Management and Corporate Profitability
Efficient working capital management is an integral part of the overall corporate strategy
to create shareholder value. We investigate the relation between the firm's net-trade cycle
and its profitability. This relationship is examined using correlation and regression
analysis, by industry and working capital intensity. Using a Compustat sample of 58,985
firm years covering the period 1975-1994, we find, in all cases, a strong negative relation
between the length of the firm's net-trade cycle and its profitability. In addition, shorter
net-trade cycles are associated with higher risk-adjusted stock returns. [JEL: G30, G32,
MIO]
Kaushik Chakraborty (2008) has done a study on Working Capital and
Profitability: An Empirical Analysis of Their Relationship with Reference to Selected
Companies in the Indian Pharmaceutical Industry
Working capital is essential for the day-to-day operations of a business, and hence it is
the life-blood of any business. Working capital management is about the management of
current assets and current liabilities in such a way that a satisfactory level of working
capital, which maximizes the profits of the firm, is maintained. Inadequacy of working
capital may lead the firm to insolvency, whereas excessive working capital implies idle
funds which earn no profits. Therefore, efficient management of working capital is an
integral part of the overall corporate strategy to improve corporate profitability. But in
reality, controversy persists on the issue whether the working capital of a firm affects its
profitability or not. Empirical studies that have been conducted in India also ended with
contradictory results. Besides this, there are many intricacies in examining the influence
of working capital on the profitability. Against this backdrop, this paper seeks to evaluate
the relationship between working capital and profitability of 25 selected companies in the
Indian pharmaceutical industry during the period 1996-97 to 2007-08. The issue has been
tackled using relevant statistical tools and techniques.
7/29/2019 Kavita SRF Fincine Company FINAL
25/43
[25]
J P Singh and Shishir Pandey (2008) has done a study Impact of Working Capital
in the Management Profitability of Hindalco Industries Limited
For the successful working of any business organization, fixed and current play a vital
role. Management of working capital is essential as it has assets a direct impact on
profitability and liquidity. An attempt has been made in this paper to study the working
capital components and the impact of working capital management on profitability of
Hindalco Industries Limited. The paper also makes an attempt to study the correlation
between liquidity, profitability and Profit Before Tax (PBT) of Hindalco. The study is
based on secondary data collected from annual reports of Hindalco for the study period
1990 to 2007. The ratio analysis, percentage method and coefficient of correlation have
been used to analyze the data. Multiple regressions were used to check the significant
impact on the profitability of Hindalco.
Mian Sajid Nazir and Talat Afza (2009) explained Impact of Aggressive
Working Capital Management Policy on Firms Profitability
The present study investigates the traditional relationship between working capital
management policies and a firms profitability. Using the panel data set for the period
1998-2005, the impact of aggressive working capital investment and financing policies
has been evaluated using return on assets as well as Tobins q. Managers can create value
if they adopt a conservative approach towards working capital investment and working
capital financing policies. The study also finds that investors give weight to the stocks of
those firms that adopt an aggressive approach to managing their short-term liabilities.
MARC DELOOF (2003) has discussed Does Working Capital Management
Affect Profitability of Belgian Firms?
Most firms have a large amount of cash invested in working capital. It can therefore be
expected that the way in which working capital is managed will have a significant impact
on the profitability of firms. Shin and Soenen (1998) find a strong negative relation
between the cash conversion cycle and corporate profitability for a large sample of listed
American firms for the 1975-1994 periods. In this paper, I find a significant negative
7/29/2019 Kavita SRF Fincine Company FINAL
26/43
[26]
relation between gross operating income and the number of days accounts receivable,
inventories and accounts payable of Belgian firms.
Debasish Sur and Kaushik Chakraborty(2011)have explainedEvaluating
Relationship of Working Capital and Profitability: A Study of Select Multinational
Companies in the Indian Pharmaceutical Sector
In the present environment of cut-throat competition, almost all the business firms have
no other option but cutting the cost of operations in order to be competitive as well as
financially healthy. So, like other aspects of financial management, working capital
management must have a significant role in reaching this target. However, a great deal of
controversy exists over the issue whether the working capital of a firm, as determined by
its financing and investment decisions, affects its profitability or not. The present study
seeks to reexamine the interrelationship between working capital management and
profitability of ten select multinational companies in the Indian pharmaceutical industry
during the period 1996-97 to 2007-08. The selection of the companies has been made
using purposive sampling procedure. Relevant statistical techniques and tests have been
applied in carrying out the analysis. Although the study has failed to provide final
solution to this highly controversial issue, a significant outcome has been derived from it.
Shishir Pandey and Vikas Kumar Jaiswal (2011) has done a study on
Effectiveness on Profitability: Working Capital Management
For a successful working of a business organization fixed and current assets play a vital
role? Management of working capital is essential as it has direct impact on profitability
and liquidity. An attempt has been made in this paper to study the working capital
components and impact of working capital management on profitability of NALCO. The
paper also makes an attempt to study the correlation between liquidity and profitability
(PBT) of NALCO, the study is based on secondary data collected from annual reports of
NALCO for the study period 1995 to 2008. Ratio analysis and percentage method and co
- efficient of correlation have been used to analyze the data. Multiple regressions were
used to check the significant impact on the profitability of NALCO.
7/29/2019 Kavita SRF Fincine Company FINAL
27/43
[27]
Amarjit Gill, Nahum Biger, Neil Mathur (2011) explained The Effect of
Capital Structure on Profitability: Evidence from the United States
The relationship between capital structure and profitability cannot be ignored because theimprovement in the profitability is necessary for the long-term survivability of the firm.
This paper seeks to extend Abors (2005) findings regarding the effect of capital structure
on profitability by examining the effect of capital structure on profitability of the
American service and manufacturing firms. A sample of 272 American firms listed on
New York Stock Exchange for a period of 3 years from 2005 2007 was selected. The
correlations and regression analyses were used to estimate the functions relating to
profitability (measured by return on equity) with measures of capital structure. Empirical
results show a positive relationship between i) short-term debt to total assets and
profitability and ii) total debt to total assets and profitability in the service industry. The
findings of this paper show a positive relationship between i) short-term debt to total
assets and profitability, ii) long-term debt to total assets and profitability, and iii) total
debt to total assets and profitability in the manufacturing industry. This paper offers
useful insights for the owners/operators, managers, and lending institutions based on
empirical evidence.
Michael Faulkender & Mitchell A. Petersen (2003) explained Does the
Source of Capital Affect Capital Structure?
Empirical examinations of capital structure have led some to conclude that firms are
under levered. Implicit in this argument and much of the empirical work on leverage is
the assumption that the availability of incremental capital depends solely on the risk of
the firms cash flows and characteristics of the firm. However, the same market frictions
that make capital structure relevant suggest that firms may be rationed by lenders, leadingsome firms to appear to be under-levered relative to unconstrained firms. We examine
this theory, arguing that the same characteristics that may be associated with firms being
rationed by the debt markets are also associated with financial intermediaries, opposed to
bond markets, being the source of a firms debt capital. We find that firms have
significantly different leverage ratios based on whether they have access to public bond
7/29/2019 Kavita SRF Fincine Company FINAL
28/43
[28]
markets as measured by the firm having a debt rating. Although firms with a debt rating
are fundamentally different, these differences do not explain our findings. Even after
controlling for the firm characteristics previously found to determine observed capital
structure and the possible endogeneity of having a bond rating, we find that firms which
are able to raise debt from public markets have 35 percent more debt.
Kesseven Padachi (2006) has discussed Trends in Working Capital Management
and its Impact on Firms Performance: An Analysis of Mauritian Small Manufacturing
Firms
A well designed and implemented working capital management is expected to contribute
positively to the creation of a firms value The purpose of this paper is to examine the
trends in working capital management and its impact on firms performance. The trend in
working capital needs and profitability of firms are examined to identify the causes for
any significant differences between the industries. The dependent variable, return on total
assets is used as a measure of profitability and the relation between working capital
management and corporate profitability is investigated for a sample of 58 small
manufacturing firms, using panel data analysis for the period 19982003. The regression
results show that high investment in inventories and receivables is associated with lower
profitability. The key variables used in the analysis are inventories days, accounts
receivables days, accounts payable days and cash conversion cycle. A strong significant
relationship between working capital management and profitability has been found in
previous empirical work. An analysis of the liquidity, profitability and operational
efficiency of the five industries shows significant changes and how best practices in the
paper industry have contributed to performance. The findings also reveal an increasing
trend in the short-term component of working capital financing.
Stein Frydenberg (2004) has done a study onTheory of Capital Structure
This paper is a review of the central theoretical literature. The most important arguments
for what could determine capital structure is the pecking order theory and the static trade
off theory. These two theories are reviewed, but neither of them provides a complete
7/29/2019 Kavita SRF Fincine Company FINAL
29/43
[29]
description of the situation and why some firms prefer equity and others debt under
different circumstances. The paper is ended by a summary where the option price
paradigm is proposed as a comprehensible model that can augment most partial
arguments. The capital structure and corporate finance literature is filled with different
models, but few, if any give a complete picture
RATIONALE OF THE STUDY
Many studies have already been done across the globe on Impact of Working Capital
Management & Capital Structure on Profitability. In this study there are three variables:
Working Capital Management, Capital Structure, and Profitability of JK Tyre. Here
Working Capital Management & Capital Structure is the independent variable and
Profitability is the dependent variable.
In this study we have found out the Impact of Working Capital Management & Capital
Structure on Profitability. As Working Capital is very necessary for smooth running of
the business & it has been proven many times that it has an impact on profitability.
Similarly, Capital Structure also indicates the wealth of shareholders. This research has
opened new dimensions for further study.
7/29/2019 Kavita SRF Fincine Company FINAL
30/43
[30]
RESEARCH METHODOLOGY
DEFINITION
The advanced learner dictionary of current English lays down. The meaning of
researcher as, A careful investigation or inquiry specially through such for new
facts in any branch of knowledge.
Redman & more define -
" Research as a systamized refers to gain new knowledge"
Some people consider, Research as a movement, a movement for the known to
the unknown.
TYPES OF RESEARCH
Their are two types of research are as follows -
(A) Exploratory research.
It includes literature survey and experience survey.
(B) Conclusive research.
Conclusive research is used for the hypotheses testing generated by exploratory
research.
It can be classified -
* Descriptive Research
* Experimental Research
Here I have mainly used Exploratory Research i.e. to find the Working capital ofthe Employees. This chapter deals with research methodology adopted by the
researcher. The researcher has conducted the study using both the primary and
secondary data.
7/29/2019 Kavita SRF Fincine Company FINAL
31/43
[31]
DATA COLLECTION METHOD
PRIMARY DATA -
Primary data is a data, which has been collected by the researcher himself to
reveal the facts related to the research objective. Generally primary source
information is gathered through direct observation, questionnaire, schedule and
interview methods.
For our purpose of data collection questioner and interview methods is most
suitable because at give accurate data that why we use these methods.
SECONDARY DATA -
Secondary data are the information, which are attained indirectly. Secondary
data are gathered from information collected from the individuals and
institutions through personal diaries, letters, survey documents etc.
The researcher started the research work with the help of secondary data from
various books and magazines. When the researcher collected a fair amount of
idea about the type of study that has been conducted and how he should go with
it. Then he moved on to the primary sources of data collection.
The main source here were the interviews and semi structured questions.
SAMPLE -
The researcher is partly based on sample survey.
It is an integrated component of research of design. It consists of three parts.
1. Population SRF Malanpur, Gwalior
2. Sampling size (number of respondent) - 70
3. Duration of time - 8 week.
SAMPLING METHOD
I have used Random Sampling method to find the questionnaire from employee.
7/29/2019 Kavita SRF Fincine Company FINAL
32/43
[32]
DATA ANALYSIS & INTERPRETATION
1 Are you aware of your Strength & Weakness?
60% People are aware about their strength & weakness.
2. How do you utilize your skills?
Most of the People utilize their skills in optimum way.
60
40
0
10
20
30
40
50
60
70
Yes No
Series1
82
18
0
10
20
30
40
50
60
70
80
90
In Optimistic way In Pessimistic way
Series1
7/29/2019 Kavita SRF Fincine Company FINAL
33/43
[33]
3. How would you rate you learning attitude ?
About 46% People rate their learning attitude at high level.
4. Are you satisfy with the existing appraisal?
About 68% people are satisfied with the exiting Appraisal
46
30
24
0
5
10
15
20
25
30
35
40
45
50
High Level Middle Level Low Level
Series1
68
32
0
10
20
30
40
50
60
70
80
Yes No
Series1
7/29/2019 Kavita SRF Fincine Company FINAL
34/43
[34]
5. Are you mobile in term of your transferability? (Y/N) if no (Why)
About 62% people are mobile in term of their transferability.
6. Do you feel your total job performance need to be improved?
Only 30% people think their job performance need to be improved.
62
38
0
10
20
30
40
50
60
70
Yes No
Series1
30
70
0
10
20
30
40
50
60
70
80
Yes No
Series1
7/29/2019 Kavita SRF Fincine Company FINAL
35/43
[35]
Q7 Do you feel your work contribution is important?
About 75% People believe that their work contribution is important..
75
25
0
10
20
30
40
50
60
70
80
Yes No
Series1
7/29/2019 Kavita SRF Fincine Company FINAL
36/43
[36]
FINDINGS
60% People are aware about their strength & weakness.
Most of the People utilize their skills in optimum way.
About 46% People rate their learning attitude at high level.
About 68% people are satisfied with the exiting Appraisal
About 62% people are mobile in term of their transferability.
Only 30% people think their job performance need to be improved.
About 75% People believe that their work contribution is important..
7/29/2019 Kavita SRF Fincine Company FINAL
37/43
[37]
CONCLUSION
After conducting the Studies on working capital Management in SRF Ltd. I reach
on the conclusion that is company uses self appraisal method to Appraise the
performance of its employees.
Appraisal method emphasizes human relation, which supervisors focus on
Technical knowledge and imitative. This approach:
1) Results in superior upward flow of information,
2) Forces the subordinate to become more personally involved and to some
constrains him to think about himself and hi work
3) Improves communication between Superior and subordinate, in that each
is given more information by the other when disagreements are
discovered and
4) Improves motivation as result of great participation.
But this approach has its disadvantage that the individual may rate himself
excessively high than would be if he was rated by the superior. But this
disadvantage can be removed considering the following suggestions.
7/29/2019 Kavita SRF Fincine Company FINAL
38/43
[38]
SUGGESTIONS
Self appraisal should be filled and obtained from the appraise on
Monthly or quarterly basis instead of Six monthly/yearly.
Specific duties/assignments should be allotted to every employee
in writing, which can help in flexing the responsibility/
accountability on the individuals, so at the time of writing self
appraisal by the appraise, he may not rate himself excessively high
than it would be.
Views / observations of reporting officer should be communicated
to the concerned appraise under his acknowledgement. The
comments of the reporting officer should clearly indicate the
performance and deficiencies with reasons to appraise so the
appraise can further improve his performance
The opportunity should be given to the appraise to submit the
reasons of his deficit so the authority can sort out the problem as
per norms of the company.
7/29/2019 Kavita SRF Fincine Company FINAL
39/43
[39]
LIMITATION OF WORKING CAPITAL
1 Error in Rating:- Working capital may not be valid indicator of performance
and potential of employees due to the following type of error
a) Halo effect: it is the tendency to the rate an employee constantly high or
low on the basis of over all impression.
b) Stereotyping: It implies forming the mental picture of a person on the
basis of his age Sex, cast and religion.
c) Central Tendency : It means assigning average rating to the entire
employee in order to avoid commitment
d) Constant Error: Some evaluator tends to be lenient while other is strict in
assigning performance.
e) Spill over effect: This arise when past performance effect assessments of
present performance.
Lack of Reliability: - Reliability employee stability, consistency, in the
measurement lack of consistence over time and among different raters may
reduce the reliability of working capital
Incompetence: Raters may be fail to evaluate performance accurately due to
lack of knowledge an experience
7/29/2019 Kavita SRF Fincine Company FINAL
40/43
[40]
Negative approach: Working capital losses most of its values with the focus
of management is on punishment rather than development of employee.
7/29/2019 Kavita SRF Fincine Company FINAL
41/43
[41]
BIBLIOGRAPHY
BOOKS
Author Book Title Publication Edition [Yr.]
Robbins Stephen P Organization
Behaviour
Pearson
Publication
6th Edition [2001]
Chabra T.N. Human Resource
Management
S. Chand
Publication
5th Edition [1999]
Kothari C.R. Research
methodology
New Delhi,
Vishwa
Prakashans, Year -
1999
Second
Websites :
www.srfIndia.com
http://www./http://www./http://www./7/29/2019 Kavita SRF Fincine Company FINAL
42/43
[42]
QUESTIONNAIRE
PART-I [PROFILE OF EMPLOYEE]
Name of the Employee :
Designation :
Employee Code :
Grid Code :
Dept Name :
Dept Code :
PART II [QUESTIONS OF WORKING CAPITAL ]
Q.1 Are you aware of your Strength & Weakness?
Yes No
Q.2 How do you utilize your skills?
In Optimistic Way In Pessimistic Way
Q.3 How would you rate you learning attitude ?
High Level Middle Level Low Level
Q.4 Are you satisfy with the existing appraisal?
Yes No
7/29/2019 Kavita SRF Fincine Company FINAL
43/43
Q.5 Are you mobile in term of your transferability? (Y/N) if no (Why)
Yes No
Q.6 Do you feel your total job performance need to be improved?
Yes No
Q.7 Do you feel your work contribution is important?
Yes No
Q.8 Please specify the function / processes that you are open to being ?