ABOUT THE COMPANY

Welcome to Vadilal - a company that is 77 years young. A company stated by the late Shri Vadilal Gandhi, a company that had simple, yet straight forward mission:

“To provide quality product and service at an affordable price.”

Today, vadilal is the familiar name is every Indian household. A well known umbrella brand, covering a diverse range of the product and activities, which have one thing, is common: a vibrant present and bright future.

What started as a one man show with a hand cranked ice cream maker in a small retailer outlet has today grown to employ over 700 people. What started with the earning that could easily fit into a pocket, has today risen to an annual turnover of Rs. 1250 million of which around 25% is contributing by the export? What started as a parlor with home made ice cream has already branched out into processed foods, chemical and specific gases, construction and real estate, forex advisory service…

This is our flagship company that started with ice cream, which are manufacture at our plants in India, located at Ahmadabad & pundra (Gujarat) and Bareilly (Uttar Pradesh). In these early nineties we commenced food processing operation at dharampur, in south Gujarat. All products under these categories contain purely vegetarian ingredients.

All their manufacturing and processing facilities are situated at strategies location where they can avail quality raw material in ample quantities- be it milk, butter and cream, fruits, nuts or vegetables. Their large scale of the economies the manufacturing cost, the benefit of which is passed on to our customers by providing them with a quality product at affordable price.

Over the last 77 years times have changed and the company has grown in straight but their philosophy remain unchanged.

An excellence product would be little use if it didn’t have somebody to maintain that excellence and give it to the world. That is how vadilal enterprises the marketing arm of vadilal industries came into existence.

Today companies have dynamic sales force of over 150 sales and marketing professionals. The company has effected change in its organizational structure and training inputs from time to time, in order to infuse a competitive spirit among peers and built a consolidated force of live wire professionals. Target achievement in monitored

through an elaborate management information system across the rank and file. Vadilal has to challenge of time held its own in the country, even in the presence of global giants.

There are mainly three sectors of vadilal:

1) ice-cream 2) processed food (agro) and3) other

Other includes forex division, real estate, and chemicals…….

Vadilal’s human resource department placed the major role in conducting specialized training programme, encouraging innovative ideas, in culcating willingness to accept change and rewarding all this with an attractive incentive package. Vadilal people believe their people are their most valuable assets who have made vadilal what it is today, and what it is they who will take them far beyond the horizon in the days to come….

In 10,November vadilal have made India’s largest SUNDAY ICECREAM

DIRECTORS OF THE COMPANY

Name of Directors:

1. Mr. Ram Chandra R Gandhi, Chairman

2. Virendra R. Gandhi, Vice Chairman & Managing Director

3. Mr. Rajesh R Gandhi, Managing Director

4. Mr. Devanshu L Gandhi, Managing Director

5. Mr. Chetan M Maniar, Director

6. Mr. Kshitish M Shah, Director

7. Mr. Rohit J Patel, Director

Key persons

1. Mr. Rajesh R Gandhi.

2. Mr. Devanshu Gandhi

Business experience of Directors / Partners:

All the promoter directors have rich experience in the line of ice-cream manufacturing. Mr. Ram Chandra R Gandhi has pioneered Vadilal’s growth and success in ice-cream business. Mr. Virendra R Gandhi and Mr. Devanshu L Gandhi are involved in technical functions of manufacturing plants and Mr. Rajesh R Gandhi looks after finance and marketing functions of the company.

The company is selling its products through its sole selling agent - M/s Vadilal

Enterprises Ltd the marketing arm of the Vadilal group.

CORPORATE PROFILE

Today, the name Vadilal conjures images of lip-smacking ice cream in a whole gamut of

flavours. Vadilal spells quality, availability, variety and state-of-the-art machinery and

equipment. It has, however, been a long journey for the group, which traces its origins

way back to 1907, when a certain unassuming gentleman, by the name of Vadilal Gandhi,

the great-grand father of Virendra R Gandhi, Rajesh R Gandhi and Devanshu L Gandhi,

started a soda fountain. He passed on the business to his son, Ranchod Lal, who ran a

one-man show, and, with a hand cranked machine, started a small retail outlet in 1926.

Eventually, Ranchod Lal's sons, Ramchandra and Lakshman, inherited the business and

they were instrumental in giving a new direction to the company. The duo imparted a

new vision to the venture and infused a spirit of calculated risk-taking into the company. 

As a result, by the 1970s, the Vadilal Company had already evolved into a modern

corporate entity.

"In 1972-73, the company had 8-10 outlets in Ahmedabad. Gradually, we moved

from the city to other parts of Gujarat. By 1985, the company moved towards

neighbouring states like Rajasthan and Madhya Pradesh. But the expansion was

undertaken very methodically and we spent five to six years in spreading our business

and then consolidating it" says Shri Ramchandrabhai Gandhi (Chairman).

VISION / MISSION

“To become an Indian MNC in frozen foods”.

“To provide products and services at an affordable price without compromising the

quality,”

- Shri Ramchandrabhai Gandhi.

ABOUT VADILAL GROUP

Vadilal group had its humble beginning, more than 80 years ago, when its founder, Late

Shri Vadilal Gandhi started manufacturing Ice cream with a hand cranked machine.

Today it is a diversified Business Group with major interests in Ice Creams, Food

Processing, Real Estate Development and Specialty Gases.

Head Quartered in Gujarat, the most industrialized State in India, the Group had a turnover (1998-99) exceeding Rs. 200 Crores. Major companies of the Group are listed in several Stock Exchange of India. The Group has a larger investor base and it brand name “Vadilal” commands an excellent equity.

The "Vadilal" philosophy of providing its customers with quality products and services at

affordable prices has resulted in the brand being a household name in India.  Vadilal

group has plans to set up a new ultra modern and highly sophisticated ice cream

manufacturing plant in the state of West Bengal. The plant would have a small unit for

food processing. The plant would have a capacity of 50,000 liters/day and will be located

about at Sakhalin Industrial Estate, Howrah 15 kms. From Kolkatta. In 1982 the

Company was incorporated in the name of Vadilal Oxygen Pvt. Ltd., on 28th April to

carry on the business of purification and refilling of Oxygen Gas and selling the same.

VADILAL INDUSTRIES LTD

There are four big plants of VADILAL INDUSTRIES LTD.

(1) Dhudheswer (Ahmedabad)

(2) Pundhara

(3) Barely (U.P) (These plants were establish for ice cream division)

(4) Dharmpur (Valsad) was established for process food division.

The Vadilal Industries Ltd. is also for two-export department. The industry exports the

process food. Vadilal Industries Ltd is also very famous for their Ice Cream all over

India. Vadilal also develops the chemical, gas and manufacturing activity also.

Vadilal Industries Ltd. have achieved 25% market share of all over Indian Ice cream.

There are four divisions in Vadilal Industries Ltd:

(1) Ice Cream division.

(2) Process food division.

(3) Chemical division.

(4) Construction division.

VADILAL ENTERPRISE LTD

An excellent product would be of little use if it didn't have somebody to maintain that

excellence and give it to the world. That is how Vadilal Enterprises - the marketing arm

of Vadilal Industries came into existence.

Today Vadilal have a dynamic sales force of over 150 sales & marketing professionals.

The company has effected changes in its organizational structure and training inputs from

time to time, in order to infuse a competitive spirit amongst peers and build a

consolidated force of live-wire professionals. Target achievement is monitored through

an elaborate Management Information System, across the rank and file. Vadilal has stood

the challenge of time and held its own in the country, even in the presence of global

giants.

VADILAL GROUP OF COMPANIES

(1) Vadilal Ice Cream

(2) vadilal processed food division

&

(3) others

I .vadilal chemical(dhudheshwar plant)

II .vadilal real estate

III. vadilal forex

(1) .ICE-CREAM DIVISION ISO 9002:

Vadilal Ice Cream division has always been a hot favorite with the people both inside and outside the organization. In India, the name Vadilal is synonymous with Ice Cream.

Vadilal is the first organization sector that is making Ice Cream. A Vadilal industry is

very popular for their Ice Cream. The name of Vadilal has connected with different types

of Ice Cream and their flavour. Vadilal offers the widest range of Ice Cream flavours and

frozen desert above 200 in the category in packs including cups, party pack family bricks,

cones and candies. The Ice-cream Division now has a production capacity of 60,000

litters per day at three sophisticated manufacturing facilities in the country. The

geographical locations of these facilities are such that they are in consonance with the

market expansion strategies of the Division.

(2) PROCESSED FOODS DIVISION ISO 9002:

Vadilal industries limited entered the

horticulture processing industry in

may.1991. In a processed food division

they produce many of vegetable frozen

and 8 types of fruit frozen. The food is

processed using IOF (individually quality

frozen) technique. 30%-processed foods

are exported in other countries like

Australia, Malaysia, USA, Europe, UAE, Kuwait, Africa, Taiwan, Saudi Arabia,

Singapore, Hong Kong, Japan, and U.S.A, Canada etc.

(3) CHEMICAL DIVISION:

Vadilal Chemicals Ltd. is a multilocational, multiproduct

company of the Group. Since 1970 the company is engaged in

manufacturing of Industrial and specialty gases, petroleum

products are Nitrogen, VCL Argon, VCL Hydrogen, VCL

Helium, Anhydrous Ammonia, and Liquor Ammonia Liquid

Argon.

(4) CONSTRUCTION DIVISION:

Vadilal, a name to reckon with in Ice

Creams has always been at the forefront

of innovation. Vadilal forayed in

construction business in 1994. With the

ever-increasing rapid growth of

commercial sector, the persistent need

for real estate is now getting more

urgent. In spite of the various

complexes coming up all across the city,

there is a lot left to be desired, in terms of architecture, design and other details. This is

the prime reason behind Vadilal’s foray into real estate and construction. Company

constructs the houses for selling purpose, for construction purpose organization has big

plant in Thaltej near Ahmedabad. (Ahmedabad is a large   commercial hub

in Western India, second to only Mumbai

(4) FOREX DIVISION:

Forex is a dynamic division of Vadilal Group since 1996.

Caters complete Forex advisory services to Groups, in areas of RBI directives, FEMA Regulations etc.

BULLION Informative service of Gold, Silver, and Precious metals on International trading, quotes, rates, forwards, futures, etc.

LME-METAL Informative service of most base metal quotes at LME,

COMEX, NYMEX, Shanghai, markets, and complete guide and informative service on forward, futures and relative data. Highly professional & experienced personals keep an constant watch on the market trend & update www.vadilalmarkets.com

COMPANY ACHIEVEMENT

On November, 10 2001 Vadilal Industries Ltd made a record by making the

largest ice cream sundae. The ice cream was made using 4950 liters of ice

cream, 125 kgs dry fruits, 255 kgs of fresh fruits and 39 liters of sauces. The

length of the sundae was 20 feet and height of 9 feet.

The Bareilly plant has been awarded the coveted ISO 9001 Accreditation and

HACCP certification.

Vadilal Ice Cream has achieved 30% market share among Indian Ice Cream

Industry and 60% market share in Gujarat.

They have been awarded the ISO 9002 Certification for quality systems, by

M/s Underwriters Laboratories Inc., USA.

Vadilal was also awarded the certificate of merit for excellent export

performance by APEDA (Agricultural and Processed Foods Export

Development Authority)

Theirs is one of the largest marketing networks for industrial gases in Western

India.

It has larges cold chain network in India

- 25 Stock points all across the country

- 456 distributors in different cities

- Ice Cream sold through 24000 retail outlets

‘Export House’ status by Govt. of India since 1994.

COMPANY DOMINATING AREAS

GUJARAT RAJASTHAN U .P. UTTARANCHAL DELHI

CORE-COMPETANCY

The company has already achieved significant volumes in frozen food.sp.pear & corn.

Large quainities of mango pulp and aamras are also being sold in domestic market.

MARKET POSITION OF VADILAL

The Ice Cream Industry in India today has a turnover of Rs. 15 billion (US$330

million). A quarter of this comes from the house of Vadilal alone. But that’s no

surprise, considering that they have the largest range of Ice Creams in the country –

120 - plus flavors, in a variety of more than 250 packs and forms. The range includes

cones, candies, bars, ice-lollies, small cups, big cups, family packs, and economy

packs. Something for all tastes, preferences and brands.

Vadilal has a supply chain of about 23 C&FA, more than 500 Distributors

and over 40,000 Retailers Ice Cream is widely accessible in most parts of India

To make it convenient for the consumers to relish complete range under one

roof, they have set up a chain of Happiness Parlors ‘Ice Cream Boutiques’ so to say.

Presently Vadilal has about 88 Parlors across the country that ensures amazing ice

cream preparations for its consumers. Number of people visits these parlors daily

because they know that Vadilal products contain the purest and creamiest milk, and

the freshest and tastiest fruits and nuts.

The company is exporting nearly 60 products in USA, Canada, UK, Kuwait,

UAE, Singapore and New Zealand. The company has also started selling processed

food products in domestic market.

Among the products, one is Chocobar and King Cone – all time favorites

which have today attained the generic status. Another one is Kulfi – traditional Indian

milk sweet. Some of their products are a combination with confectioneries.

Since their products are highly perishable, quick transport and proper storage

are of paramount importance. Hence the refrigeration equipment and deep freezes are

imported from companies, which are world leaders in their respective fields. To

ensure sufficient, timely and constant ice cream supply, they have a Cold Chain

Network comprising three manufacturing plants (totaling a production capacity of

1.25 lakh liter per day), about 23 C & FA, more than 500 Distributors and over 40000

Retailers.

PRODUCTS

“It is a process by which the produced from raw material to finished product.”

Production in any organization without production department no needs to finance

marketing and personnel department. If the company’s product is good and its quality is

better, then people buy its product and that leads to increase in the sales of the company.

Now, a day we, see a tuff competition in the market. Everyday new technology is to be

introduced. So it is beneficial to every to every company for concentrating on their

product quality because if quality id good and by using the product customers are

satisfied they will definitely buy.

In VADILAL INDUSTRIES LTD. they have completely concentrated on quality of the

product so company has its own R&D department to increase the product quality.

TYPES OF PRODUCTS

NOVELTIES OF PRODUCTS

BIG CUPS

Vanilla

Ripe Strawberry

2 – in –1

Chocolate Chips

Tuti Fruity

Real Mango

Rainbow

Fruit Bonanza

Kaju Draksh

Butter Scootch

Kewra

Jafrani Badam Pista

Fun 2000

Rajbhog (Ice Mithai)

SMALL CUPS

Vanilla

Ripe Strawberry

FAMILY PACKPLAIN FAVOURTIES

Vanilla

Ripe Strawberry

2-in-1

CHOCOLATE ECSTASIES

Chocolate Chips

FRUIT FANTASIES

Real Mango

Fresh Strawberry

NUTTY DELIGHTS

Kaju Draksh

Butter Scotch

Real Kesar Pista

Jafrani Badam Pista

ICE MITHAI

Rajbhog

FROZEN DESSERTS

Snowy

Yummy Kesar Pista

Yummy Mango Munch

KING KONES

Chocolate Drip

Pineapple Delight

Yummy Butter Scotch

Chashmeshahi

Prime Kesar Pista

Almond Kulfi Cone

KULFIES KULFI CORNER

Kesar Pista Kulfis

Chowpati Kulfi

Kewra Kulfi

Pista Kesar Roll Cut

Kewra Roll Cut

DANDY CANDIES

Mango Juicy

Juicee Orange

Kaju Candy

Litchee Dolly

Orange Dolly

Raspberry Dolly

Mango Dolly

Nutty Chocobar

Chocolate Chocobar

Soft Spot (Chocolate)

FROZEN DESSERT

Bargain

Best Chocobar

Mango Tango Dolly

Fun Bhari Raspberry

VADILAL SPECIALS

Heart Throb

Mini Sandwich

Sajan Sajani (Roll Cut)

Quik Sundae

Easy Sundae

August - 15

Cassatta Slice/ (Cut)

Sajan Sajani (Roll)

Vanilla Magic

Strawberry Magic

Mango Mag

DIFFERENT DEPARTMENTS

There are various departments in the organization, which perform different functions. There are departments like Production, Engineering, Quality Assurance, Marketing etc.

The list mentioned below only comprises of the departments where as an employee you will have some interaction:

1. P & A Department: This is among the first point of contact for any employee in the organization. The employee can contact this department for any query related to

his attendance, salary, leaves, confirmation, appraisal, exit procedures, local traveling etc. The P & A dept. will be the coordinator between the employee and all other departments.

2. HR Department: This department can be approached if your queries are not solved by the P & A dept. but the queries need to be genuine.

3. Accounts Department: This department gives the employees the cash or cheque for the various vouchers which the employee keeps for claiming the money which he spends for Company’s work.

4. Insurance Department: In case of any accident or illness the employee will be helped by this department.

5. Taxation Department: For all his Income Tax related queries for himself the employee should contact this department in consultation with the P & A dept.

6. Library Department: This is the department where you can approach for taking a book or any learning material.

7. Purchase Department: Usually the employee will be provided with regular stationary in his own department itself but if he needs anything else then he can fill the requisition slip in the inventory management system or ask someone from his department to do the same and take the HODs approval and get the stationary from the purchase department.

8. MIS Department: For every expense the employee makes for the company there has to be sufficient budget so that the employee can claim the expense later on. The employee should first see in his own Vadilal ERP and if some changes need to be done then he can approach the MIS department through his HOD.

9. System Department: This department will give every employee with an individual login id for Vadilal ERP.

10. Catering Department: If any employee is approached by his friend / relative for purchasing Ice-Cream, Processed Foods or any other services which we offer then the employee should contact the Catering department or the relevant business division. All employees should never miss a business lead opportunity.

WORKING CAPITAL

This project is about one of the most important financial aspect of an organization working for some economic motive. Such activity may be of any format, i.e. manufacturing or trading of goods or providing some services, they all need working capital to operate and hence need an efficient management of it.

Working capital is that portion of the total capital which is used in day to day work flow. goods and services to the consumer. It facilitates the actual happening of the activities and thereby accomplishes the organizational objectives.

This is the short-term capital or finance that a business keeps. Working capital is the money used to pay for the everyday trading activities carried out by the business - stationery needs, staff salaries and wages, rent, energy bills, payments for supplies and so on. Working capital is defined as:

Working capital = current assets - current liabilities

Where:

current assets are short term sources of finance such as stocks, debtors and cash - the amount of cash and cash equivalents - the business has at any one time. Cash is cash in hand and deposits payable on demand (e.g. current accounts). Cash equivalents are short term and highly liquid investments which are easily and immediately convertible into cash.

current liabilities are are short term requirements for cash including trade creditors, expense creditors, tax owing, dividends owing - the amount of money the business owes to other people/groups/businesses at any one time that needs to be repaid within the next month or so.

It is all about management of current assets. Management of current assets differs from that of fixed assets in three important ways:

First, in managing fixed assets, time is a very important factor; consequently, discounting and compounding techniques play a significant role in capital budgeting and a minor role in the management of current assets.

Second, the large holdings of current assets, especially cash, strengthens the firms liquidity position but also reduces the over all profitability. Thus, a risk return tradeoff is involved in holding the current assets.

Third, level of fixed as well as current assets depends upon expected sales, but it only the current assets which can be adjusted with sales fluctuation in the short run. Thus firm has a greater degree of flexibility in managing current assets.

Constantly reducing profit margins due to increased competition has forced companies to think about reducing their operating costs, so that they can remain profitable. Working capital is one of such element that requires for a close control

of management because it has been seen in the recent trends that those companies which have been successful in managing their working capital at optimal levels have become financially strong and have grown up considerably.

Requirement of working capital depends on many factors which mainly depend on the area and the type of business under consideration. Moreover it depends on the policy that company adopts regarding employment of working capital in their organization which depicts managements working style and mindset.

Thus, working capital is that component in an organization that gives a fair idea of the whole organization, its operations and working efficiency. So it becomes a matter of great importance to all the entities who have some or the other economic interest in the organization like share holders, promoters, creditors and banks who constantly keeps a check on the profitability and solvency of the business to ensure safety of their interest in the organization.

Features of the working capital:

Working capital is regarded as the excess of current assets over current liabilities.

Working capital indicates circular flow of funds in the day-to-day activities of business. That’s why it is also called circulating capital.

Working capital represents the minimum amount of investment in raw materials, work-in progress, finished goods, stores and spares, accounts receivables and cash balance.

TYPES OF WORKING CAPITAL

COMPONENTS OF WORKING CAPITAL

Inventory

Debtors

Cash

Bank&creditors

COMPONENTS OF WORKING CAPITAL BASIS OF VALUATION

1. Stock of R.M. purchase cost of R.M.

2. Stock of W.I.P At cost or market value

w.e. is lower.

3. Stock of finish goods Cost of production

4. Debtors Cost of sales or sales values

5. Cash Working Expences

WORKLNG CAPITAL CYCLE

Value addition Value addition

While managing the working capital two chalanges of current assets should be kept in

mind.

1) Short-Life-Span

2) Swift-Transformation.

The working capital needs of a business are influence by numerals factors.

1.Nature of enterprise

2.Manufacturing or production policy.

3.Operation(operating cycle)

4.Market condition

5.Availability of raw material

6.working capital policy

CASH

DEBTORS RAW MATERIAL

WIPFINISHED GOODS

WORKING

CREDITORS

PRODUCTION POLICY

It is a better financial decision to keep financial decision to keep manufacturing

goods even in the off season so as to keep on working above the break even point

(BEP) to meet at least the fixed costs on a contious basis.

WORKING CAPITAL POLICY

w.c policy broadly divided in to three categories.

1. Conservative or liberal or flexible policy-emphasis on current assests

2. Aggressive or strict or restriction policy-emphasis on fix assets

3. Moderate or middle of road policy- emphasis on both .current and fix

assets.

WORKING CAPTAL MANAGEMENT

Working capital management involves the management and control of gross current assets(as against the net working capital (NWC)And the current ass ets mainly comprise cash ,Sunday debtors(also known as Account Receivable and Bills Receivable(BRS) and invenyories (comprising raw material,consumable stores and spares, work-in-process,and finished goods)

WHY WORKING CAPITAL MANAGEMENT ?

Effective management and control of the various components of working capital has

been treated as one of the most important and vital function financial management in

any of the industrial and business units.

SOURCES OF WORKING CAPITAL

SHORT TERM

LONG TERM

1.Accruals

2.Trade credit

3.Commercial paper

4.Bank&commercial institution

5.Public Deposit

6.Inter-corporate deposit(icds)

7.Differed income

1.Retained Earning

2.Share Capital

3.Term loan

ACCRUALS :

Accrued expenses represent a liability that a firm has to pay for the services which it has already received. They represent a spontaneous interest free source of financing. The most important components of the accruals are wages and salaries, taxes and interest.

Accrued wages and salaries represent obligations payable by the firm to its employees. The longer the payment interval, the greater the amount provided by the employees. However, Legal and practical aspects put constraint on the flexibility of a firm in lengthening the payment interval.

Accrued taxes and interest constitute another source of financing. Corporate taxes are paid after the firm has earned the profits. These taxes are paid quarterly during the year in which profits are earned. This is a deferred

payment of the firm’s obligations and thus, is a source of finance. Like taxes, interest is paid periodically during the year while the firm continuously uses the borrowed funds. These expenses are not deferrable for long and a firm does not have any control over its frequency and magnitude. It is a limited source of short term financing.

TRADE CREDIT :

Trade credit appears to be a cost free source of finance as it does not involve any explicit interest charges. However, in practice it is not free. It involves an implicit cost which may be transferred to buyer by the supplier in the form increased prices or the forgone cash discount extended by the supplier to the buyer for the early payment of the dues. At times for meeting their finance requirements, companies stretch their account payables. However, this again proves to be very costly both implicitly and explicitly. Explicitly in the sense that company might have to pay penal interest for this delayed period and implicitly in the sense that this adversely affects the company’s creditworthiness.

DEFERRED INCOME:

Deferred income represents the funds received by the firm for goods and services which it has agreed to supply in future. These receipts increase the firm’s liquidity in the form of cash; therefore, they constitute an important source of financing.

Advance payments made by the customers constitute the main item of deferred income. These payments are not recorded as revenue until goods and services have been delivered to the customer. They are therefore, shown as a liability in the firm’s balance sheet.

BANK FINANCE FOR WORKING CAPITAL

Banks are the main institutional sources of the working capital finance in India. After trade credit, bank credit is the most important source of financing working capital requirements. The amount approved by the bank for the firm’s working capital is called credit limit. Credit limit is the maximum funds which a firm can obtain from the banking system. In case of firms with seasonal businesses banks may fix separate limits for peak and non peak season indicating the time period during the year when these two limits will be applicable. In practice, banks do not lend 100% of the limit sanctioned. They deduct margin money from it.

FORMS OF BANK FINANCE:

A firm can withdraw funds from the bank in various forms within the maximum permissible limit. They are as follow:

1. Overdraft:

Under overdraft facility the borrower is allowed to withdraw funds in excess of the balance in his current account up to a certain specified limit during a stipulated period. Overdrawn amount is repayable on demand. It is a very flexible arrangement from the borrower’s point of view since he can withdraw and repay funds whenever he desires within the overall stipulation. Interest is charged on the daily balances – on the amount actually withdrawn – subject to some minimum charges.

2. Cash credit:

It is the most popular method of bank finance for working capital in India. Under the cash credit facility the borrower is allowed to withdraw funds from the bank up to the sanctioned credit limit. He is not required to borrow the entire sanctioned credit at once, rather, he can draw periodically to the extent of his requirement and repay by depositing the surplus funds in his cash credit account. There is no commitment charge; therefore, interest is payable on the amount actually utilized by the borrower. Cash credit limits are sanctioned against the security of current assets. Funds borrowed under this facility are repayable on demand.

3. Purchase or discount of Bills:

The bank purchases or discounts the borrower’s bills. The amount provided under this agreement is covered within the over all cash credit or overdraft limit. When a bill is discounted, the borrower is paid the discounted amount of the bill. However bank collects

the full amount on the maturity. Difference between the amounts is the banks charge for this service.

4. Letter of credit:

There always remains the risk of default on the part of buyer. Therefore, suppliers and particularly foreign suppliers insist on getting a guarantee from the buyer’s bank for the payment in the event of default on the part of the buyer. This facility is extended by the bank to its customer in the form of an instrument called “letter of credit”. This arrangement passes the risk of suppliers to the bank. This facility is extended by banks to only financially sound customer. However, unlike cash credit or overdraft facility letter of credit is an indirect form of financing; the bank will make payment on behalf of the buyer only if he fails to meet his obligation.

5. Working capital loan:

A borrower may sometimes require extra amount of funds due to occurrence of some unforeseen contingencies. This is given to them in the form working capital loan. However borrower is required to pay a higher rate of interest as compared to the normal rate.

Guidelines for bank finance:

Bank credit is a scarce source of finance. Banks are the safest place for an individual to keep money. However, returns on bank deposits are very less as compared to the other investment options. Therefore banks get limited amount of deposits which they can offer under various credit facilities. Moreover there are many other contenders for bank credit. These mainly include agriculture, small scale industries, farmers, small man and many others. Public enterprises also approach commercial banks for their working capital requirement.

Hence, monetary authorities have been very particular regarding the efficient and legitimate use of bank finance by the companies. In this regard, reserve bank of India has taken many steps from time to time for bringing the necessary changes in the banking system with the changing needs. An important chapter of this reform journey is Tondon committee and the Chore committee.

These committees laid down norms which formed the basis for extending bank finance to the companies for fulfilling their credit needs for working capital. They introduced the concept of MPBF i.e. maximum permissible bank finance. MPBF formed a substantial

part of the working capital gap (Current assets – Current liabilities). This was done on the recommendations of the committee according to which banks were recommended to

Finance only a part of the working capital requirement and not the 100%. Logic behind such recommendation was that, since certain amount remains invested in the business on permanent basis which is also termed as permanent working capital, such amount should be financed from the long term sources of funds of the firm.

These committees also recommended on the style of credit and the information system (flow). In addition to this chore committee recommended banks to consider peak and non peak limits separately in case of the businesses which are having seasonal element in them.

These efforts have been very successful in reforming the credit system of the banks. It has resulted in more optimize usage of bank finance. However still we have to do a long way on this path since lot of in efficiencies still exist some of which have developed with the passage of time and changing requirement.

PROCEDURE FOR GETTING ADVANCES BY BANK

Realistic assessment and sanction of credit needs ,phased disbursement of loans and the post sanction supervision and follow up advances are the main facets of credit risk management by commercial banks(as also by the other financial instituti

PROJECT APPRAISAL

“Project appraisal is the process of critical examination and analytical evaluation of a loan appraisal for project to see” whether funds ,if lent,can be rapid out of the profit generated, within a reasonable time.

It provides an analytical base for the decision making process.

Objectives

To assess wheter the entrepreneurs are technically and managerially equipped to execute the project andwhwther their antecedents like character,redit-worthiness ,intergrity,etc are satisfactory.

To examine the technical feasibility of the process of manufacturing the product and the availability of the infrastructure facilities, raw materials,etc.

To Reallystically determine the market demand for the proposal product and achivablity of the projected sales.

To assess the profitability of the project on a realistic basis and the adequacy of the cash surplus for repayment of loan within a reasonable time.

BANK’S SYSTEM AND PROCEDURE FOR PROJECT APPRASIAL

All the relevant factors required to be considered by the entrepreneurs while preparing the project report and to be examined by the bank officers , while apprasing the project reports,are contained in various loan application forms prescribed by the banks for different quantum of advances.

For example:

Over Rs 2lakh and upto Rs 5 lakh;

Over Rs 5 lakh and upto Rs 10 lakh;

Over Rs 10 lakh (where Tandon committee norms earlier applied)

These application forms well serve the purpose of check lists to verify whether all the relevant factors have been duly considered.

A proper assessment of the working capital requirements by the banks depends on the realistic assessment of two main factors,viz’

1) Anticipated monthly sales

2) Period of stocking of various components of inventories and terms of credit sales.

FACTORS CONSIDERED BY THE BANK OFFICER FOR THE ASSESSMENT OF THE TOTAL WORKING CAPITAL REQUIREMENT

Rs.

A. Anticipated monthly sale.

B. cost of raw materials per month

C. total expenses per month

-

-

-

D.Cost of production per

Month

Therefore every month company has to submit statement of stock to bank

FREQUANCY OF INSPECTION

The frequency of inspections for different quantam of advances may be fixed by the banks somewhat on the following lines.

QUANTUM OF ADVANCES FREQUENCY OF INSPECTION

1)Loan say,upto Rs.2lakh Once in 3 months by the field officer.

2)Loan say,above Rs.2lakh Once in 2 months by the field officers monthly

and upto Rs 5 lakh by the field officerss

TONDAN COMMITTEE LENDING NORMS

THREE ALTERNATIVE METHOD

1) FIRST METHOD

2) SECOND METHOD

3) THIRD METHOD

These three methods of lending can easily be understood when computed in the following example.

PARTICULARS Rs.( In Lakh)

Acceptable Current Assests 160

Anticipated Current Liabilities other than bank

60

Finance(i.e.mainly sundry creditors) Core assets

20

FIRST METHOD

Current assets 160

(less) other current liabilities (-)60

Working capital gap 100

(less) mainimum NWC(margin) @25%(-) 25

Maximum permissible bank finance(MPBF)

75

SECOND METHOD

Current Assets 160

(Less)NWC@25%(Margin) (-)40

120

(Less)Other Current Liabilities (-)60

Maxium Permissible Bank Finance(MPBF) 60

THIRD METHOD

Current Assets 160

(less) Core assets (-)20

(less) NWS 25% (margine) (-) 35

(less) other current liabilities (-) 60

Maximum permissible bank finance =45

Since Octomber 1997, the suggested Norms for inventories and receivables and the second mothod of lending , based on the Tandon Committee Recommendation, have ceased to be regulatory.

ASSESSMENT OF WORKING CAPITAL REQUIREMENTS BY BANK

There are three main methods,viz.,

(a) Projected Balance Sheet (PBS) method(b) Cash Budgeted (CB) Method(c) Projected Yearly Turnover method

(a) PROJECTED BALANCE SHEET METHOD

In place of MPBF the PBS method is based on

1. Projected Balance Sheet.2. Funds Flow ,Planned for the Current Year and the Next Year;and3. Profitability and Other Financial Parameter.

(b) CASH BUDGETED (CB) METHOD

Under Cash Budgeted method the financial needs are assessed on the basis of the Projected Cash Flow.

(c) PROJECTED YEARLY TURNOVER METHOD

This method is adopted for assessing the working capital requirements of small scale industries up to Rs 4 crore(raised from Rs 2 crore, earlier)

WHAT IS CONSORTIUM?

Consortium is a Latin word, meaning ‘partnership, association or society’ and derives from censors ‘ partner’, itself from con-‘together’ and sors ‘fate’, meaning owner of means or comrade.

A consortium is an association of two or more individuals, companies, organizations, or governments (or any combination of these entities) with the objective of participating in a common activity or pooling their resources for achieving a common goal.

WHY A BANK CONSORTIUM?

Bank consortium means an association of more than one bank which join together to fulfill the financial requirements of any company. They share a proportionately in a pre decided manner. Such an arrangement diversifies the risk from any one bank, in other words risk of default on the part of company gets divided among the consortium members and hence a bank can finance more amount of money depending on the degree of risk it can take.

Consortium banking had faded away with the demise of financial institutions. However, with the kind of revolution that has occurred in the financial system of india , this concept is regarding its popularity. According to banking sources, banks are appointing a single security trustee who will draft the terms and conditions for the entire group of banks involved in lending.

Consortium lending had become past due to problem in settling non-performing assets through the corporate debt restricting (CDR) method. Disagreement among bankers used to cause the entire process to fall through. In extreme cases in the past.Even major lenders had gone ahead with the debt restricting process without the full consent of lenders. Therefore, each bank had decided to have its own terms and condition for lending to a corporate account. However, consortium banking has made a comeback after the legal procedure for settling bad accounts has been simplified and streamlines by the Reserve Bank of India and through the enactment of the securitization act.

Company also has an axcess to the private sources for funds in the form of bill discounting. However this sources is used only to fill the transitional gaps on monthly bases. This is not any major sources of finance.

Given the history of VADILAL, this (bank) has been the most feasible sources for financing their requirement of working capital. Bank generally do not finance with adequate security. Company has very well fulfill this requirement by means of hypothecation of stock and mortage of fixed assets.

Apart from this, company also uses trade credits from its suppliers in the form of sundery which are also known as account payable.

As far as cost of the funds is concerned, they are well as per the running market rate and nothing extra is to be paid. However, their cost vitiates due to change in bank interest rates i.e. BPLR (benchmark prime lending rate) from time to time.

Thus from all this we can say that company has quite successfully met its finance requirement for their working capital given the external and internal limitations.

FINANCIAL FOLLOW-UP REPORTS (FFR)

FFR-1 and FFR-2 are now being used by the banks in replacement of QIS-1,QIS-2 and QIS-3(Which were earlier prevalent as per the tendon committee and Chore Committee Recmmendations)

The requirement of FFR-1 and FFR-2 apply to all the working capital finances of Rs.1 crore and above

FFR-1: To be submitted by the borrower quarterly and within 6 weeks of the close of quarter.

This form is a simplified version of qis -2 with some additional information .

FFR-2 To be submitted by the borrowers half- yearly and within 8 weeks of the half year.(This form is a modified version of QIS-3.

Therefore every month company has to submit statement of stock to bank from which company want to take credit.

SCENARIO OF WORKING CAPITAL IN VADILAL

Working policy:The major considerations for vadilal is being in to seasonal business there is high probability of fluctuations in the prices of the raw material,ho.wer company cannot change its price in the running season for various marketing related reasons.This forces the company to maintain a high level of working capital as compared to maintain a high level of working capital as compared to the normal level.

WORKING CAPITAL POLICY REVIEW

Current assets to fix assets

PARTICULARS 31-03-2008(Rs in Lacks) 31-03-2007(Rs in Lacks)

(1) fixes assets

Gross block 8,135.97 6181.59

Less depreciation 3,568.41 3226.65

Net block 4567.56 2954.94

(2)Curretnt Assets,Loan&Advantages

Inventories 3,086.06 2438.17

Sundry Debtors 2,737.01 2191.53

Cash&Bank Balances 146.50 103.54

Oher Current assets 70.59 41.25

Loan&Advantages 1,075.46 9234.1

Sub total 23387.56 5697.59

CA/FA Ratio 5.12 1.93

31-03-2008(Rs in Lacks) (1) fixes assets

Gross block

Less depreciation

Net block

(2)CurretntAssets,Loan&AdvantagesInventories

Sundry Debtors

Cash&Bank Balances

Oher Current assets

APPROVED MPBF IN VADILAL ACCORDING TO TANDON COMMITTEE

FIRST METHOD

Current Assets 2008(Rs in Lakh)

Inventories 3086.06

Debtors 2737.01

Cash & Bank bal 146.50

Other current assets 70.59

Loans & advances 1,075.46

Total 7,115.62

Less-Current liabilities& provision 3,110.35

Working Capital Gap 4005.27

Less Minimum NWC(Margin)@25% 1001.3175

MPBF 3003.9525

SECOND METHOD

2008 (Rs in Lakh)

Total current assets 7,115.62

Less-NWS @ 25% 1778.905

5336.715

Less- other Current Liabilities 3,110.35

MPBF 2226.365

THIRD METHOD

2008(Rs in Lakh)

Current Assets 7,115.62

Less-Core assets

1.Stock & store 134.53

2. raw material 898.25

3. Packing material 526.00

4.Finished Goods (includes goods in transit)

1,527.28

3,086.06

Less-NWC @25% 771.515

2314.545

Less-Other Current Liabilities 3,110.35

MPBF

CURRENT SCENARIO OF FINANCING OF ICE-CREAM

BUSINESS IN VADILAL

Company still mainly relies upon banks for fulfilling there working capital requirement for which they have taken various above mentioned facilities from bank.Following are the technical aspect of each of the availed facility by the company for there domestic business of ice-crem.

CASH CREDIT:

Purpose:to meet the working capital needs of their ice-cream business.

Security: Company is required to maintain sufficient security for this facility with the bank.They are as follow.

a)D.P not executed by company.

b)Hypothecation of raw material, finished goods,stores and spares ,packing material lying/stored at their factory at Dudheshar ,Barelly,Pundra,proposed plant at Calcutta and other godowns of their associate concerns at company’s C&F site and other place.

c)Letter of continuing security

d)Letter of undertaking

e)Irrevocable power of Attorney for book debts.

Provision: cash credit limit is allowed against stock at various plants as per requirement.Company is required to provide insurance for all the stock and no lien letters from C&F agents.

General terms;

a)Company is required to submit monthly statement of stock and book debts hypothecated to the bank as of each month by the 10th of the following month.any delay attract penal interest @2% p.a. no drawing is allowed against unpaid stock.

b)No drawing is allowed on goods received against L/C and they are to be shown seperatly in the stock statement.

c)Company is required to take full insurance of the stock covering comprehensive risk in the name of the bank and original policy is to be submitted to the bank.

d)Company is also required to submit statement of book debt every month.Such a statement should be duly certified by a chartered account at the end of every quarter.

Margin: margin requirement for availing this facility is 25% of stocks, 50% of book debt.

CURRENT EXPORT FINANCE PATTERN OF VADILAL

Currently company has taken both the kinds of financing failities from the bank i.e, pre and post shipment . under pre-shipment ,company takes two types of credit facilities i.e, EPC(export packing credit) and PCFC(packing credit in foreign currency). Under pre shipment they have taken FBD/FBP(foreign bill discounting/purchase) for meeting their working capital requirement. Now their financing mechanism goes like this;

Company takes credit on the export orders on hand through EPC/PCFC window for producting goods. These goods are then transported through ship to their destination.In this whole transation it is the banks of both the parties (vadilal and their customer ) that take care of the financial aspect of the transaction.

On our request , our bank puts money in our C.C account for utilization.Such a creit is permissible for a period of 180 days . within this 180 days company is required to submit the export documents in the bank for realizing payment the foreign customer by its bank and then duly deposited in our banks account in India.

After goods are sent for shipment, documents are submitted to the domestic bank with in 180 days(failing to this bank charges 2% penal interest from the company)These documents include invoice and inland letter.These documents are than submitted to the foreign bank by the domestic bank seeking conformation of the payment by the customer within the stipulated period.Then these documents are given to the customer against which he can take delivery of the goods from the shipping company.

On the due date, customer make payment to their bank and that bank submits the amount to our bank and hence the account is liquidated.

As far as vadilal is concerned ,they have to pay this penal interest almost regularly.This mainly happens due to the seasonality of the business.since their raw material (mango) is seasonal in nature, company has to procure it once in a year keeping in mind their requirement for the whole year.company takes orders from their customers in advance for the whole year and accordingly takes EPC/PCFC for procurement of raw material.

It is but natural that the stipulated perod of 180 days is crossed and hence they have to pay penal interest.This is a serious loop hole in case of export workingcapital financing of vadilal.

Company has also taken postshipment financing from the consortium in the form of FBD/FBP.Whenever company is in the need of extra finance they take it form the bank by discounting their export invoice from the bank.

RATIOS ANALYSIS OF THE COMPANY

Important ratios of working capital

Current ratio:

Current ratio is widely used indicator of a company’s ability to pay its debt in the short term. It shows the amount of current assets a company has per rupees of current liabilities.

Current ratio = current assets ÷ current liabilities

Calculation:

(amts in lakhs)

Yearcurrent assets

current liabilities

Ratio

2006-07 48.76 14.1 3.45

2007-08 56.97 20.25 2.81

Interpretation:

Here, we can see that the current ratio decline from 2006 to 2007. In 2006 the ratio was 3.45and in 2007 it decreased to 2.81. This decrease is because the increase in current liability has been higher than the increase in current assets.

Quick ratio:

Quick ratio establishes a relationship between quick assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably very soon without a loss of value. Cash is considered to be most liquidity assets and other current assets are relatively liquid. Inventories are considered to be less liquid. The ratio find out to by dividing quick assets by current liabilities

Quick ratio = (current assets – inventories) ÷ current liabilities

Calculation:

(amts in millions)

Yearcurrent assets Inventories

current liabilities Ratio

2006-07 48.76 17.73 14.1 2.2

2007-08 56.97 24.38 20.25 1.6

Interpretation:

We can see that the quick ratio has been decreased compared to last year. It decrease by 0.6. In the year 2006 ratio was 2.2 and in 2007 ratio increased to decrease to 1.6. Here ratio is low then past year so it indicates that company is very speedy in paying, doubtful, and long duration outstanding debtors. Less value of ratio give idea that the company paying its obligation in time.

Inventory Turnover Ratio:

Inventory turnover ratio indicates the efficiency of the firm in producing and selling its product. It shows how efficiently the goods produced are converted into sales. It is calculated by dividing the cost of goods sold by average inventory.

Formula: cost of goods sold ÷ average stock

Calculation:

(amts in lakhs)

yearCost of Goods Sold

Average stock Ratio

2006-07 9.82 9.39 1.05

2007-08 8.03 9.32 0.86

Interpretation:

Here we can see that the ratio decreases to 0.19 in the year 2006 the ratio is 1.05 and in 2007 it is 0.86. decrease in the ratio indicates that excessive inventory level then production and sales activity, or slow moving or absolute inventory.

Working capital to sales ratio:

This ratio indicates the firm's ability to finance additional sales without incurring additional debt.

Formula: Working capital ÷ sales revenue.

Calculation:

(amts in lakhs)

YearWorking Capital

Total Sales Ratio

2006-07 34.66 108.78 0.31

2007-08 36.72 119.11 0.3

Interpretation:

Here we can see that in 2006-07 ratio was 0.31 and in 2007-08 it decreased to 0.01. so there is very slight different between current year ratio. As rate of increase in the working capital is quite equal to increase in rate of total sales.

SWOT ANALYSIS

Strength:The company is concentrating on the international market as well as external market also. and the products which are exported by the company are highly demanded in wastern countries. and hence it enjoys a near monopoly in its export business plus dominating area.. Even in the domestic market Vadilal is in strong position.The company also enjoys a good reputation among its customers due to

the finer quality of products strong distribution network innovative idea of product

(a) Vadilal Industries Ltd. is one of the largest ice-cream manufacturing companies in the country. The company is having excellent market share in Western India viz. Gujarat and Rajasthan and in certain states of northern India viz. Uttar- Pradesh and Uttaranchal .In the last few years, the company has also made expansion of its market share by entering into states like Bihar, Jharkhand, Orissa, Punjab, Haryana , Chandigarh etc by improving the distribution network.

(b) The manufacturing units are located in Gujarat and Uttar Pradesh for uninterrupted supply of Ice-creams, which are well complimented by large distribution network.

© in last union budget the government has taken various measures by way of reducing excise duty in ice cream and proceeded food.

Weakness: Company still require to maintain its inventory management.

There is no proper lay out facility at their plant Company also don’t have strong command in money market. Company fail in advertisement of frozen desert Company still perform as a follower of amul

Opportunities: (a) The company is also engaged in agro based food processing sector which is one of the major thrust areas of the new central govt. There is a huge overseas market for a food processing company.

(b) Expansion of domestic market for ice-creams and processed foods.

(c) Withdrawal of ‘Kwality Walls’ from small cities/towns.

Threats:(a) Increased competition due to entry of players like ‘Amul’ and other local Brands with their low priced products.

(b) Any change in govt. policies and import/export policies may affect the company.

(c) threat from china market in the proceed food division.

.

CONCLUSION

Vadilal being a growing enterprise is on the expanding mode. This is even favoured by the growing market for its prodct and hence company’s funds requirements are always on up swing.there are differences and some of them are substantial.Whether it is their inventory management policy or receivable management policy.certain things are objectionnable.

Competition in the ice-cream market is growing and thus there is a constant pressure on the profit margin of the company.Hence to remain profitable., company must reduce its operating cost to the maximum possible extent.An efficient management of the working capital will automatically ensure it.

Company should also try to explore various other options for financing which includes money market instruments primarily.

One thing which I would like to mentioned at this point of time is that working capital cannot be managed in isolation.Various other functional departments have an effect over it. It is in fact a backline work in isolation, it has to be a comprehensive groth of the company as a whole.

In this line ,I would like to mentioned one of my observations which I have made in my 45 days training.

Company prepares two categories of product.

1. ICE-CREAM2. FROZEN DESERT

The basis difference between the two is that,frozen desert is prepared from skimmed milk powder and vegetabke oil,while ice-cream is prepared from milk.Certainly there is a huge difference in the taste of both the products.However, USP of frozen desert is that it is a health riendly prodct as compared to ice-cream which contains lot of calories.people are less aware of this fact.and they compare this product with ice-cream only.despite of the fact that it is no where written on the packaging that it is ice-cream.Therefore on the taste parameter ,consumer rate it is a low product.

In these one and a half months of my summer training I have learned a lot not just on any particular aspect ,rather it has been a fruitful learning experience for me in all the spheres of corporate life.Apart from just reinforcing the academic learning it has taught me how to work in an environment which is full of uncertainties.I hope that I can make full use of what I have learned in vadilal in my professional career.

Bibliography1) www.vadilalgroup.com

2) www.bseindia.com

3) Management and Control of Working Capital by Satish Mathur