PROJECT REPORTON

WORKING CAPITAL MANAGEMENTIN

OSWAL WOOLLEN MILLS LIMITED

Presentation By:-

ORGANISATION PROFILE

THE NAHAR GROUP The Nahar Group- one of the leading business groups of India

came into existence in 1949 with the initial efforts of three Oswal brothers, Sh. Vidya Sager Oswal, Sh. Lachman Dass, and Sh. Rattan Chand Oswal. They started a hosiery factory to manufacture socks only. It was a dynamism vision- hard work, farsightedness, and co-cooperativeness of Sh. Vidya Sager Oswal that small factory in the days of II World War bagged a contract from Military.

This was the zoom-up point for the Oswal brothers. On 23rd June, 1949 the Oswal hosiery factory spitted into

• Oswal Woolen Mills, and • Oswal Spinning and Weaving Mills Ltd

In the year the turnover of reach to a new peak at

1800 crore in the year 1999-2000 with a foreign exchange (of Rs 600 crore in it).the group continued excellence in the export has been recognized by the government as well as the export council of India and rewarded by several trophies, awards and certifications by them.

• Woolmark Certification on Monte Carlo Products.

• Business Super brand Affiliation of Monte Carlo.

More Achievements

• Monte Carlo and OWM yarns were exhibited as best products at INTERNATIONAL WOOL SECTRRIAT in INDIA. It has been rated as best in woolens and fashion.

• From 1995 to 1999 ‘Best Exhibited Product’ by the Wool mark Company for ‘Monte Carlo’ woolens.

NAHAR GROUP OF COMPANIES• OSWAL WOOLLEN MILLS LTD• NAHAR EXPORTS• NAHAR FABRICS LTD.• NAHAR INTERNATIONAL LTD.• NAHAR IND INFRASTRUCTURE LTD• NAHAR SUGAR AND ALLIED IND LTD• NAHAR IND ENTERPRISES LTD.• OSWAL COTTON MILLS LTD.• NAHAR FIBRES LTD.• NAHAR SPINNING MILLS LTD.

OSWAL WOOLLEN MILLS LTD.

• Established in1949, the company is manufacturing all type of blended worsted yarn, weaving yarns, blankets, Lois ,shawls etc. it also has a facility of wool combing, low to top converter, acrylic woolen and polyester dyeing and vegetable oils .The company is proud to have highly popular ,bounded products of knit wear MONTE CARLO AND CANTERBURY. Company has a turnover of Rs. 225 cr. The main operations of the company are at Ludhiana. The OWM Ltd. Is a flagship company of Nahar group OWM LTD. is a name of reckon with, both in the domestic and international markets research and today the company boasts North India’s most sophisticated laboratory approved by the INERNATIONAL WOOL SECRETARIAT (IWS) and is authorized to act as a quality checking center for other manufactures.

GROWTH CHART- FEATURES• Total number of units 9.• Group turnover is Rs. 2254 crore in 2007.• Export Market: U.S.A., United Kingdom, Germany, Russia, Japan, Australia,

New Zealand, Holland, Thailand, Hong Kong, Singapore, Taiwan, South Africa, Canada, Egypt, Israel and Bangladesh.

• No strike/accident situation and near zero staff turnover.• Important brand names are “MONTE CARLO” and CANTERBURRY” OWM were

the proud recipient of the “Best exhibited Products” award from the international wool Secretariat for these two glamour’s brands.

• Product portfolio: Spinning, knitting, fabrics processing, hosiery garments, knitwear, sugar, infrastructure development and information technology

• COTTON COUNTY is there emerging ready to wear Brand. • Beyond their professional portfolio lies the human group that has always been

deeply enriched in social upliftment at every level like • Jawahar Lal Oswal public charitable Trust• Mohan Dai Oswal Memorial Hospital

Quality Control and Policy• We have established a quality management system (QMS) and have

implemented the same throughout our Company. A management review committee under the chairmanship of Mr. Sandeep Jain, our Executive Director has been constituted for conducting the review of our Company's quality management system, quality policy and objectives at least once in six months for ensuring its continuing suitability, adequacy and effeteness. We are committed to provide total customer satisfaction by meeting all requirements and continual improvement of quality management standards performance. The following are the objectives of our quality management system :-

To enhance customer satisfaction • Regular review and Up gradation of technology• Cost reduction in operations

PRESENT CAPACITIES

• Worsted Spinning• 36416 Spindles• Woollen/mohair tops• 2.50 million lbs per annum• Cotton spinning• 21348 spindles• Denim Cloth• 26 Million Mtrs Per Annum

Management StructureLIST OF BOARD OF DIRECTORS

• Mr. Jawahar Lal Oswal Chairman-Cum-Managing Director• Mr. Amarjeet Singh Director• Mr. Dinesh Oswal Director• Mr. Kamal Oswal Director• Mr. Sandeep Jain Executive Director• Mr. Dinesh Gogna Executive Director• Dr. (Mrs.) H.K. Bal Additional Director• Mr. O.P. Sahni Additional Director• Mr. K.S. Maini Additional Director• Dr. Suresh Kumar Singla Additional Director

Brands of OWM

• Monte Carlo• Canterbury

MAJOR COMPETITORS OF OWM

Woollen products • CASABLANCA• PRINGLE (SCOTLAND)Woolen/blended worsted yarn business• Vardhman Textiles Limited• Jayshree Textiles Limited• Malwa Cotton Mills LimitedDenim Fabric • Arvind Mills Limited , Aarvee Denims Limited,

Raymond Limited.

S.W.O.T Analysis

• STRENGTHS• Farsightedness of the chairman MR. Jawahar Lal Oswal• Extensive Experience of our Promoters• Good brand equity• Many persons are working here for more than 50 yrs. This

shows commitment of employees towards their org.• Strong dealer network, mutual relations with them.• Good training programs by OWM for their employees.• Member of wool mark and ISO 9002 • Automated machines of latest technology• Exclusive designs, good texture and fabrics.

• WEAKNESSES• Lack of professionalism• Long hierarchy• Structure of departments is not fully professional• OWM is dependent upon foreign producers for greasy

wool.• Depend on the third party for sale and the distribution

of the product.• Expanding the ‘Monte Carlo’ product range to make it

an ‘All Season Brand’. Any inability in repositioning the brand may adversely affect our business.

• Operating in a highly competitive and fragmented industry.

• OPPURTUNITIES • With booming retail sector and big players like

WALMART, BHARTI entering into that field, OWM is also stepping ahead with a mission of opening up of 150 retail outlets all over India under a brand name MONTE CARLO.

• Fabrication for various companies likes NIKE, MARKS AND SPENCER, GAP, WILLS, etc.

• Manufacturing of kids garments• Best quality goods, can quote for best selling

price• Expanding the business in Finance sector

• THREATS• Mushrooming and upcoming of small

hosieries in Ludhiana• Seasonal demand for their major product i.e.

pullovers

WORKING CAPITAL

CONCEPT OF WORKING CAPITAL :

CONCEPT OF WORKING CAPITAL

GROSS WORKING CAPITAL

NET WORKING CAPITAL

• GROSS WORKING CAPITAL: Gross working capital represents the amount of funds invested in current assets. Thus, the gross working capital is the capital invested in total current assets of the enterprise. Current assets are those assets which in the ordinary course of business can be converted into cash within a short period of normally one accounting year.

• NET WORKING CAPITAL: Net working capital is the excess of current assets over current liabilities, or it represents the difference between current assets and current liabilities. Net working capital may be positive or negative. Positive net working capital is that when current assets are more than current liabilities. But when current liabilities become more than current assets then the working capital is negative.

OBJECTIVES

• To analyze the working capital management of the company.

• To determine the operating cycle of the unit.

NET WORKING CAPITAL=Current Assets-Current Liabilities

Particulars 2008-09 2009-10 2010-11 2011-12 2012-13

CURRENT ASSETS 2853.29 8970.69 14160.08 18992.82 23788.04

CURRENT LIABILITIES 164.75 2365.13 2982.41 2998.97 3012.65

NET WORKING CAPITAL 2688.54 6605.56 11177.67 16010.85 20805.69

CURRENT RATIO= Current Assets

Current LiabilitiesParticulars 2008-09 2009-10 2010-11 2011-12 2012-13CURRENT ASSETS 2853.29 8970.69 14160.08 18992.82 23788.04 CURRENT LIABILITIES 164.75 2365.13 2982.41 2998.97 3012.65 CURRENT RATIO 17.32 3.79 4.75 6.37 7.98

INTERPRETATION

A high current ratio indicates firm’s liquidity position to pay its current obligations in time as and when due.Whereas a decrease in this ratio indicates deterioration in the liquidity position of the firm.

ACID TEST RATIO= Quick Assets

Current LiabilitiesParticulars 2008-09 2009-10 2010-11 2011-12 2012-13

QUICK ASSETS 945.23 5,758.51 10,284.87 15,117.61 19,912.83 CURRENT LIABILITIES 164.75 2365.13 2982.41 2998.97 3012.65 ACID TEST RATIO 5.74 2.43 3.45 5.07 6.68

INTERPRETATION1:1 is considered a satisfactory acid test ratio whereas a low quick ratio indicates firm’s liquidity position is not good.

Creditors Turnover Ratio=Net Credit Purchases

Average CreditorsPARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13NET CREDIT PURCHASES 4076.12 5258.08 6471.51 7107.73 6993.37AVERAGE CREDITORS

778.42 833.45

1,054.92

820.23 502.50

CREDITOR TURNOVER RATIO

3.86

4.98

6.13

6.74

6.63

INTERPRETATIONA high Creditors Turnover Ratio indicates the company returns its credit on time

DEBT EQUITY RATIO= Long Term Debt

Shareholder’s Equity

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13LONG TERM DEBT 5700.00 9019.75 8509.75 6889.75 5269.75

TOTAL EQUITY 6505.43 10535.62 15250.26 20582.50 25877.25DEBT EQUITY RATIO 0.88 0.86 0.56 0.33 0.20

INTEREST COVERAGE RATIO= EBIT

INTEREST

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13

EBIT2713.51 4410.83 5212.26 5811.17 5696.86

INTEREST282.94 380.63 497.62 478.93 402.11

INTEREST COVERAGE 9.59 11.59 10.47 12.13 14.17

GROSS PROFIT MARGIN = Gross Profit X 100

Sales

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13

GROSS PROFIT 3613.40 5661.85 6834.42 7470.65 7356.29

Sales 16091.46 22394.45 30448.30 33672.82 33782.93

GROSS PROFIT MARGIN 22.46 25.28 22.45 22.19 21.85

OPERATING PROFIT RATIO= EBIT – Other incomes

Net Sales

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13

EBIT-Other Incomes 2,657.37 4,350.83

5,142.26

5,741.17

5,626.86

Net Sales 15,634.33 21,834.59

29,839.33

33,063.86

33,083.97

Operating Profit Ratio 0.17 0.20 0.17 0.17 0.17

NET PROFIT RATIO= EAT

Net Sales

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13

EAT2430.57 4030.20 4714.64 5332.24 5294.75

Net Sales

15,634.33 21,834.59 29,839.33 33,063.86

33,083.97

Net Profit Ratio 0.16 0.18 0.16 0.16 0.16

NET WORKING CAPITALPARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13

INVENTORIES 1369.76 2658.88 3296.91 3341.52 3410.63SUNDRY DEBTORS 2338.10 1840.64 2502.60 2603.23 2723.53CASH & BANK BAL. 1000.56 5611.28 10247.18 15289.93 20085.14

LOAN & ADV. 538.30 553.30 578.30 581.30 593.30

SUB-TOTAL(A) 4256.72 10664.10 16624.99 21667.74 26462.95

LESS: 1403.43 1693.41 2464.91 2671.32 2687.11CURRENT ASSETS 2853.29 8970.69 14160.08 18992.82 23788.04CURRENT LIABILITIES (B) 164.75 2365.13 2982.41 2991.25 3001.34NET WORKING CAPITAL(A-B) 2688.54 6605.56 11177.67 16010.41 20805.63

Changes in working capital PARTICULARS 2009-10 2010-11

Changes in W.C.Increase Decrease

INVENTORIES 2658.88 3296.91 638.03 SUNDRY

DEBTORS 1840.64 2502.60 661.96 CASH & BANK

BAL. 5611.28 10247.18 4,635.90

LOAN & ADV. 553.30 578.30 25.00

SUB-TOTAL 10664.10 16624.99 5,960.89

LESS: 1693.41 2464.91 771.50 CURRENT

ASSETS 8970.69 14160.08 5,189.39 CURRENT

LIABILITIES 2365.13 2982.41 617.28NET WORKING

CAPITAL 6605.56 11177.67 4,572.11

OPERATING CYCLEThe duration of time required for completing the following

sequences of events in case of manufacturing firm s called the operating cycle.

Conversion of cash into raw material.Conversion of raw material into work in progress.Conversion of work in progress into finished goods.Conversion of finished goods into debtors & bills receivable through sale.Conversion of debtors & bills receivable into cash.

RawMaterial

Debtors& Bills

Receivables

Cash

Work In

Process

FinishedGoodsSales

OperatingCycle

Operating Cycle PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13ADD  1. Inventory Conversion Period  Raw mat. Holding period 21 18 36 40 40 WIP period

21 28 33 33 32 Finished goods holding period 18 17 23 25 25 2.Debtors collection period 55 43 31 21 19 3.Gross operating cycle

115 106 123 119 116

LESS.  4.Creditors payment period 94 73 59 54 55 Net operating cycle

21 33 64 65 61

WORKING CAPITAL TURNOVER RATIO= COGS

Net Working Capital

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13

COGS 12429.47 17725.01 23723.22 25884.38 25996.94

Net W.C. 2688.54 6605.56 11177.67 16010.41 20805.63

W.C. TURNOVER RATIO

4.62

2.68

2.12

1.62

1.25

COGS = Opening stock + purchases + direct expenses - closing stock

INVENTORY TURNOVER RATIO= Cost of goods sold Average Inventory

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13

COGS 12429.47 17725.01 23723.22 25884.38 25996.94Average inventory

1,988.91

2,747.67 5,450.63 6,388.72

6,221.72

Inventory Turnover Ratio

6.25

6.45 4.35 4.05

4.18

INVENTORY HOLDING PERIOD(in days)= 365

AVERAGE TURNOVER RATIO PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13Inventory Turnover Ratio

17.37

13.92 11.33 11.23

11.27

Inventory HoldingPeriod 58 57 82 87 86

Debtors Turnover Ratio=Net Credit Sales Average Debtors

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13

Net Credit Sales 15,634.33 21,834.59 29,839.33 33,063.86 33,083.97 AVERAGE DEBTORS 2340.64 2,560.64 2,502.60 1,930.25 1,750.36 DEBTOR TURNOVER RATIO 6.68 8.53 11.92 17.13 18.89

DEBTOR COLLECTION PERIOD(in days)= 365 days

Debtor Turnover RatioPARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13 DEBTOR TURNOVER RATIO 6.68 8.53 11.92 17.13 18.89 DEBTOR COLLECTION PERIOD 55

43 31 21 19

WORKING CAPITAL MANGEMENT COMPONENTS

Receivables Management Inventory Management Cash Management

RECEIVABLES MANAGEMENTPARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13SUNDRY DEBTORS 2338.10 1840.64 2502.60 2603.23 2723.53 SUNDRY DEBTORS INDICES 100.00 78.72 107.04 111.34 116.48

AVERAGE COLLECTION PERIOD (in days)

= 365 days Debtor Turnover Ratio

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13 DEBTOR TURNOVER RATIO 6.68 8.53 11.92 17.13 18.89 DEBTOR COLLECTION PERIOD 55 43 31 21 19

INVENTORY MANAGEMENT

PARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13RAW MATERIAL (YARN)

705.44

743.61 913.39 834.81

736.22

WORK IN PROCESS

722.41

672.41 892.19 840.64

864.34

FINISHED GOODS

1,158.06

1,150.36

1,413.67 1,560.00

1,642.62

STORES & SPARES

34.81

34.81 77.65 60.31

52.86

TOTAL

2,620.72

2,601.19

3,296.90 3,295.76

3,296.04

INDICES

100.00

99.25 125.80 125.76

125.77

MANAGEMENT OF CASHPARTICULARS 2008-09 2009-10 2010-11 2011-12 2012-13CASH & BANK BAL. 1000.56 5611.28 10247.18 15289.93 20085.14

INDICES 100.00 560.81 1,024.14 1,528.14 2,007.39

LIMITATION OF THE STUDY

1. Limited Data2. Limited Period

FINDINGS

The Net Working Capital of the company is increasing so the company is able to pay-off its short-term liabilities.

The creditor turnover ratio increases , it shows company is increasing its efficiency in collecting its sales on credit.

The raw material holding period is increasing as the company is new and expanding its production.

The net operating cycle is increasing but it may start decline from next year as the company is improving its debtor and creditor collection period.

The working capital turnover ratio is declining because of relative high increase in net working capital.

The inventory turnover ratio is decreasing.

SUGGESTIONS• Company has surplus owner funds , it must

increase its debt to enjoy the benefits on trading on equity.

• The company should adopt proper inventory control. Proper inventory management technique will help the unit to decide upon the quantity of inventory to be kept.

• The company should increase its current liabilities in order to make full use of its current borrowing capacity.

• Company should stretch the credit period given by the suppliers.

• Company has to take control on cash balance because cash is non earning assets

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