Working Capital Report Arvind Mills 2009 2010

LOVELY PROFESSIONAL UNIVERSITY
A PROJECT REPORT ON
Submitted as partial fulfillment towards the degree of
Master of Business Administration

SUBMITTED BY: JATIN KHURANA PROJECT GUIDE: Mr. HIREN RAO SUBMITTED TO: ARVIND LIMITED
CERTIFICATE
THE ARVIND LIMITED

Naroda Road, Ahmedabad-380 025 India. Phone :( 079) 22203030
A MEMBER OF LALBHAI GROUP
TO WHOMSOEVER IT MAY CONCERN

This is to certify that JATIN KHURANA, student of LOVELY PROFESSIONAL UNIVERSITY, have successfully completed their training at the Finance & Accounting Department of THE ARVIND limited, under the guidance of MR.HIREN RAO. The project duration was from 21st JUNE to 5th AUGUST 2010. We wish him all the most the best future career pursuits. For THE ARVIND limited. Mr. Shobit Tyagi Head Corporate Human Resources
PREFACE
For a long time, there is a wind of recession blowing all over the business world and wealth liberalization policy in the Indian Economy. So, now a days market is becoming more and more competitive scenario, company demands more and more professional and accomplished employees. Students have to get practical training along with the theoretical knowledge of the business condition. There are many advantage of making these kinds of reports, the student can become aware of the particular knowledge about marketing of capital goods. Reading gives only the theoretical knowledge that visits gives practical knowledge. It is true that technical studies can not be perfect without practical training and perfection is basic necessity of management student.
Acknowledgement
With the successful completion of my Summer Internship Program, I would like to express my deep gratitude towards all of those who have helped me during my learning program. Firstly I would like to thank Mr. Shobhit Tyagi, Head- Human Resource, Arvind limited for providing me with this opportunity to be a part of this organization. I would also like to thank my LPU guide, Mrs.Sweta Singh for guiding me throughout this project. Her dedicated and constant efforts and sincere advices helped me a lot in gaining knowledge and putting forward my full potential. He gave me ample of time to complete this report. Though language is a poor substitute for sentiments but still I want to express my Special thanks to my company guide Mr. Hiren Rao, Head finance Department for his wise advises and critical analysis towards my project. Without his support this project would never have been a success. With his each and every contribution there has been a value addition in my learning. I would also like to show my heartfelt thanks to Ms. Milli Das who helped me a lot in completing my project. Her timely and sincere suggestions added value to my project. Besides this, my sincere thanks to all the members of Arvind Limited who have always guided for improvements during these 6 weeks. I would also thank my family for their constant support in completing this project.
JATIN KHURANA
DECLARATION
We do hereby declare that the project report title: STUDY OF MANAGEMENT WORKING CAPITAL IN FINANCE
At ARVIND limited, Ahmadabad has been submitted as a part of the curriculum for the degree of Master of Business Administration, LOVELY PROFESSIONAL UNIVERSITY, JALANDHAR
JATIN KHURANA MBA-II
INDEX
(A) NAME OF THE CONTENT INTRODUCTION TO TEXTILE INDUSTRY CONTRIBUTION OF TEXTILES TO ECONOMY EVOLUTION OF TEXTILE INDUSTRY SEGMENTS IN TEXTILE INDUSTRY INDIAN TEXTILE INDUSTRY GUJRAT TEXTILE INDUSTRY TEXTILE INDUSRTY KEY FACTS MAJOR PLAYERS IN TEXTILE INDUSTRY INTRODUCTION TO ARVIND MILLS COMPANY PROFILE FABRIC PRODUCTION ORGANIZATIONAL STRUCTURE SUBSIDIARIES BOARD OF DIRECTORS GROUP OVERVIEW COMPANY'S VISION COMPANY'S MISSION COMPANY'S PHILOSOPHY FUNCTIONING OF THE ORGANIZATION DENIM MANUFACTURING PRROCESS BRIEF ABOUT OPERATIONS SPINNING DYEING AND SIZING WEAVING FINIISHING QUALITY ASSURANCE DEVELOPMENT AND NEW TECH. GROUP INSPECTION ISO AND EMS INTERNATIONAL MARKETING PORTFOLIO OF ARVIND FINANCIAL SCENARIO SHAREHOLDING PATTERN OF ARVIND LTD.
(B)
(C )
(D)
PG.NO 10 11 11 12 13 13 14 15 17 18 19 20 20 21 22 23 23 24 24 27 28 30 33 37 39 41 43 45 47 51 57 60 61
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(E)
(F) (G) (H) (J) (K) (L)
FROM OLD TO NEW ARVIND WORKING CAPITAL MANAGEMENT CONCEPT OF WORKING CAPITAL FORMS OF WORKING CAPITAL COMPONENTS OF WORKING CAPITAL SOURCES OF WORKING CAPITAL OBJECTIVES OF WORKING CAPITAL DETERMINANTS OF WORKING CAPITAL SIGNIFICANCE OF ADEQUATE WORKING CAPITAL EFFECTS OF EXCESSIVE WORKING CAPITAL BALANCE SHEET OF ARVIND PROFIT AND LOSS A/C OF ARVIND WORKING CAPITAL OF ARVIND(ACTUAL) TANDON COMMITTEE NORMS WORKING CAPITAL OF ARVIND(TANDON COMMITTEE) WORKING CAPITAL GAP SUMMARY OF OPERATING CYCLE ARVIND LTD. LAG PERIOD INTERPRETATION WORKING CAPITAL POLICY PROBLEMS WITH EXCESSIVE WORKING CAPITAL S.W.O.T ANALYSIS CONCLUSION BIBLIOGRAPHY
62 64 65 66 68 69 72 72 74 74 76 77 78 85 86 87 88 89 90 91 92 94 97 98
INTRODUCTION
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The Indian textile industry has a significant presence in the economy as well as in the international textile economy. Its contribution to the Indian economy is manifested in terms of its contribution to the industrial production, employment generation and foreign exchange earnings. It contributes 28 % of industrial production, 13 % of excise collections, 25 % of employment in the industrial sector, nearly 28 % to the countrys total export earning and 6 % to 28% the GDP.
Industrial Production
Excise Collections
13 %
Employment in the Industrial Sector
25 %
Countrys total Export Earning
28 %
GDP
6%
CONTRIBUTIONS OF TEXTILE INDUSTRY IN ECONOMY
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In human history, past and present can never ignore the importance of textile in a civilization decisively affecting its destinies, effectively changing its social scenario.
EVOLUTION AND EVALUATION OF TEXTILE INDUSTRY

The RAG TRADE, as it is referred to in the UK and Australia is the manufacture, trade and distribution of textiles. There were various stages from a historical perspective where the textile industry evolved from being a domestic small-scale industry, to the status of supremacy it currently holds. The cottage stage was the first stage in its history where textiles were produced on a domestic basis. During this period cloth was made from materials including wool, flax and cotton. The material depended on the area where the cloth was being produced, and the time they were being made. In the later half of the medieval period in the northern parts of Europe, cotton came to be regarded as an imported fiber. During the later phases of the 16th century cotton was grown in the warmer climates of America and Asia.
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A number of new innovations led to the industrialization of the textile industry. In the initial phases, textile mills were located in and around the rivers since they were powered by water wheels. After the steam engine was invented, the dependence on the rivers ceased to a great extent. In the later phases of the 20th century, shuttles that were used in the textile industry were developed and became faster and thus more efficient. Today, modern techniques, electronics and innovation have led to a competitive, lowpriced textile industry offering almost any type of cloth or design a person could desire. With its low cost labor base, China has come to dominate the global textile industry.
SEGMENTS IN TEXTILE INDUSTRY

Our textile industry constitutes the following segments Readymade Garments- denims, made-ups, shirts, etc. Cotton Textiles including Handlooms (Mill made / Power loom/ Handloom) Man-made Textiles Silk Textiles Woolen Textiles Handicrafts including Carpets Coir Jute
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INDIAN TEXTILE INDUSTRY

The Indian textile is one of the largest segments of the Indian economy accounting for over one-fifth of the total industry production. The industry has a complex structure marked by presence of large scale production units as well as small-scale units. The industry is manufacture driven with spinning having large-scale operation retailing as weakest link. Indias textile is second largest in the world, next to china, with annual shipments of USD 20 billions and a work force of 20 million people. It generates 7% of Indias GDP, 20 % of its industrial output and 38 % of its export earnings. The competitive position of Indian textile largely reflects its vast domestic fiber base, low cost and skilled work force, established allied industries, significant yarn and fabrics capacity and manufacturing flexibility. India also produces a fabulous range of men-made fibers, polyester cotton and polyester-viscose blended fabrics. India offers an alluring range of made up item like scarves and stoles in exotic, intricate patterns and magical finishes. The Indian industry is pre-dominantly cotton based with 70 percent of the raw Materials consumed being cotton. It is composed of the three major sectors, namelythe mill, also called the organized sector; the handloom and power loom sectors both being classified as decentralized sectors and; the garments sector.
GUJRAT TEXTILE INDUSTRY

Gujarat is one the leading industrial states in India and textile industry in India in particular had contributed in big way to the industrialization of the state. In fact, development of the many industries like dyestuff, chemicals Engineering/foundry and cotton farming is solely dependent on these sectors. The state is well known for development of hybrid cotton, ginning, power looms, composites mills, spinning units and independent processing houses. In Gujarat, textile manufacturers use cotton based fabrics in mill sector, major reason being the availability of the basic raw materials in the state, i.e. cotton. Similarly many spinning units producing more conservative yarns were established in the state. The
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state happened to be more conservative with cotton textile products mainly in the organized sector, weaving and synthetic textile in decentralized sector. Surat art silk manufacturers are only exception. Similarly, independent processing units process synthetic blended and cotton fabrics. Clusters of processing units are located in Surat, Ahmedabad and Jaipur, though these production units have good capacity of processing wide range of fabric. Ready-made Garment manufacturing and hosiery knitwear unit also exists in SSI categories. In early 1990s Gujarat saw dramatic change in its textile industry scenario where quite a few textile mills started manufacturing Denim. The Arvind mills, Ashima Textiles, Soma Textiles, Modern Denim, and Arvee denim started manufacturing denim. So many mills at a time fetched a new name for Ahmedabad Denim city of India whereas city of Surat became Silk city of India.
TEXTILE INDUSTRY KEY FACTS

The Indian textile industry is second largest industry in terms of providing vast employment opportunities and employs around 35 million people in country after agriculture sector and contributes 14% to industrial production of the country. Textile Industry contributes around 6% of GDP, 13% of excise collections, 25% of employment in industrial sector, and has 28% share in countrys export.
Industry has direct and strong linkage with rural and agriculture sector, therefore it is estimated that, one of every six households in country is directly or indirectly dependent on this industry Industry contributes 12% of world production of textile fibers and yarn 25% share in the world trade of cotton yarn 23% of the worlds spindle capacity 6% of global rotor capacity 61% in world loom age Including textiles and garments, 30% of India's export comes from this sector. Large and potential domestic & international market, large pool of skilled and cheap labor, well-established industry, promising export potential etc. are few strengths of Indian Textile Industry.
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Highly Fragmented, High dependence on cotton sector, Lower productivity, and Unfavorable Labor Laws are few drawbacks of the industry which it has to overcome. After the elimination of quota restrictions and implementation of National Textile Policy 2000, it is estimated that the industry will grow with rapid rate and help to strengthen the Indian economy.
MAJOR PLAYERS IN THE TEXTILE INDUSTRY IN INDIA
ARVIND LIMITED Arvind Mills is one of the major and fully vertically integrated composite mills players in India. It has large production in denim, shirting and knitted garments. It is now adding value by manufacturing denim apparel. Its sales are around US$ 300 million. RAYMONDS: Raymonds has the large, diversified integrated business model, which is spread across the value chain from yarn to retail. It is specialized in Diversified woolen textiles. It already supplies to some US retailers. RELIANCE TEXTILES: Reliance Textiles is one of the major textile Company that is in business of fully integrated man-made fiber. It has capacity of more than 6 million tones per year. It has joint venture partners like, DuPont, Stone & Webster, Since (Italy) etc.
VARDHMAN SPINNING: vardhman deals in spinning, weaving and
processing segment of the industry. It is planning to double its fabric processing capacity to 50 million meters. It is an approved supplier to global retailers like Gap, Target and Tommy Hilfiger. Its sales are little over US$ 120 millions
WELSPUN INDIA : (Manufactures terry towels) CENTURY TEXTILES: (Composite mill, cotton & Man-made) MORARJEE MILLS: (Fully integrated Composite Mill) INDO RAMA: (Cotton and Man-made) GTN TEXTILES: (Cotton Yarn and Knit Fabrics) GINNI FILAMENTS LIMITED:. (Yarn and Fabric)
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LNJ BHILWARA GROUP :(Diversified and vertically integrated denim
producer with spinning and weaving capacity)

MAFATLAL TEXTILES: (Fully integrated Composite Mill) MODERN GROUP :(Diversified, producer of denim, syntax and thread) ASHIMA SYNTAX: (Man-made Fiber) KG DENIM: (Fabrics) SANGHI POLYESTER LIMITED:. (Manmade Fiber) NOVA PETROCHEMICALS: (Man-made Fiber) S.KUMAR SYNFABS LIMITED:. (Home furnishing and Suit Fabrics) BOMBAY DYEING LIMITED: (Composite and fully integrated) RAJASTHAN PETRO SYNTHETICS: (Diversified) BSL LIMITED: (Textiles) GARWARE POLYESTER :(Diversified) BANSWARA SYNTEX: (Composite) NATIONAL RAYON CORP.: (Man-made fiber) GSL INDIA LIMITED: (Threads) INDIAN RAYON :(Man-Made Fiber) ALOK TEXTILES: (Cotton and Man-made Fiber Textiles) SHARDA TEXTILES MILLS: (Man-made Fiber) BIRLA GROUP DORMEUIL BIRLA VXL LIMITED: (Fully integrated
woolen textiles)
GOKULDAS IMAGES: (Diversified) HANIL ERA TEXTILES: (Yarn, Cotton & Man-made Fiber) OSWAL KNIT INDIA: (Woolen Wear) NIRVAT SAM APPARELS; (Apparel)
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COMPANY PROFILE
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The aim was to indigenously produce fine and superfine cotton fabric as well as traditional material for vast potential Indian market. At this juncture, Arvind Mills was set up with the pioneering effort of three brothers, Kasturbhai, Narrotambhai and Chimanbhai Lalbhai becoming Worlds largest exporter and Asias largest producer of denims. During 1980s several mills in Ahmedabad closed down as a result of competition from cheaper cloth produced by small power loom enterprises. Militancy spurred by textile labour unions prevented the shutdown of several lossmaking mills, and in the mid 1980s Ahmedabad was a city of industrial strives. ARVIND MILLS has risen like a phoenix from the ashes of Ahmedabad textile mills. In just eight years it has successfully implemented a turnaround strategy. Established in 1930, Arvind Limited is the flagship company of $ 498 million. Lalbhai Group has now focused its attention on few selected core product groups. Arvind today is a onestop shop for all cotton fabric requirements, where product range spans the entire gamut of cotton fabric. It is also a rapidly expanding manufacturer of garments such as jeans and shirts. With the best technology and business acumen Arvind Mills became the true multinational producing the finest fabric available in the country that rivaled imported fabric. Since then, there has been no looking back. Having established itself as Indias largest denim manufacturer, Arvind Mills is confident that in the near future it will become the fifth largest denim producer in the world.
FABRIC PRODUCTION
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In the 1980s the growing threat from small power loom operators forced Ahmedabads composite mills to shift their focus to product areas in which they could compete. In order to better address newer and wider business opportunities, the company shifted perspective from domestic to international markets. At a time when the local textile industry was declining, Arvinds management devised a turnaround strategy called Reno vision. It represented an open-minded approach that would seek out new opportunities. In 1987 Arvind Mills made a conscious strategic decision to change its production emphasis from a portfolio of traditional domestic textiles to high quality cotton fabrics. This required a level of technological expertise, which small power loom operators could not compete with. Arvind identified denim as a key fabric. International consultants McKinsey & Co. helped to frame companys business strategy, formulate its organizational restructuring and establishing international alliances. Today the company is engaged primarily in the manufacturing of indigo-dyed denim fabrics, fine and superfine cotton shirting and bottom weights, and conventional domestic fabrics such as sarees and voiles. In 1995 Arvind Mills held an 80% share of India's domestic market for denim.
ORGANIZATIONAL STRUCTURE
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Arvind defines its operations in terms of Strategic Business Units (SBUs). Each product line such as denim, shirting, knits, voiles, etc is designated as an SBU. Each unit is headed by a president who is able to make independent decisions on finance and marketing. The president is assisted by vice-presidents who look after functional divisions. The concept of SBUs, which was implemented in spring 1995, was adopted on the advice of McKinsey; mainly to facilitate the companys expansion plans but also to provide an accurate picture of the performance of individual product lines. Each SBU, which is similar to a product division within a corporation, operates as a profit center. While long-term planning is carried out by the corporate group in consultation with the management of each SBU, medium and short-term planning is in the hands of the unit. Arvind has been successful in attracting high caliber professionals from the best multinationals and blue chip companies.
SUBSIDIARIES
Arvind Mills has 11 subsidiaries, of which seven are in textile and related businesses. They are: Arvind Clothing limited. Arvind Fashion limited. Arvind Worldwide Inc, USA Arvind Clothing limited (ACL), situated in Bangalore, began commercial production in April 1994. ACL is the exclusive licensee in India of CluettPeabody & Co of the USA, which owns the Arrow brand name. It has the capacity for making 1 million shirts per annum, and has received ISO 9002 certification. Arvind Fashion limited (AFL) is a licensed user of the brand names belonging to the US Company VF Corporation, which owns the well-known international trade mark Lee. The company has a letter of intent from the Indian government (pending the issue of a license) permitting it to manufacture up to 960,000 garments per annum, provided it exports 50% of the garments produced. LOVELY PROFESSIONAL UNIVERSITY 21
AFL has invested Rs.160 million in establishing a jeans manufacturing unit at Bangalore. The state-of-the-art factory, which has a production capacity, of 500,000 pairs of jeans per annum, is equipped with machines made in the USA, Japan and Europe. Spring 1995 saw a launch of a wide range of products-including jeans, jackets, denim shirts, twill shirts, T-shirts and accessories such as belts and bags under the Lee trade mark. These are sold through exclusive showrooms located in major cities throughout India. Although its current turnover is small, AFL is in good position to capture a significant share of the growing domestic market.
BOARD OF DIRECTORS
The top management of the company consists of following members: Name Mr. Sanjay S. Lalbhai S/O Mr. Shrenik bhai Lalbhai Mr. Jayesh k. Shah S/O Mr. Kantilal Shah Mr. G.M. Yadwadkar S/O Mr. M.A Yadwadkar Mr. S.R. Rao S/O Raghunatha Rao Mr. K.M. Jayarao Mr. Sudhir Mehta S/O Uttamlal Nathalal Mehta Mr. Tarun Sheth S/O Natwarlal Gordhandas Sheth Mr. Munesh Khanna S/O Narindra Khanna Designation Executive Chairman & Managing Director (Promoter) Executive Director & Chief Financial Officer Non-Executive, Independent Nominee Director IDBI Bank limited. Non-Executive, Independent Nominee Director EXIM Bank of India Non-Executive, Independent Nominee Director ICICI Bank limited. Non-Executive, Independent Director Non-Executive, Independent Director Non-Executive, Independent Director
GROUP OVERVIEW
The Lalbhai group, founded by the 3 Lalbhai brothers in 1908, has grown to become one of India's most diversified business houses, with a significant presence in
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the textiles, ready-to-wear, chemicals, air-conditioners and telecom industries in India. Each company in the group, in its own way, pursues a single mission - to be the benchmark in the industry. To achieve this, they have tied-up with a variety of companies, all world leaders in their respective fields. LALBHAI GROUP COMPANIES TEXTILES/ YARNS o Arvind limited. o Arvind Products limited. o Arvind Fashion limited. o Arvind Brands limited. o Arvind Intex o Arvind Cot spin o Garment Export Division, Bangalore o Arvind Overseas limited., Mauritius CHEMICALS o Anil Starch Products limited. o Atul limited. TELECOM o Arvind Telecom OTHERS o Anup Engineering limited. o Anagram Stock Broking o Lalbhai realty limited. o Amtrex Appliancesm limited.
COMPANYS VISION
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"To achieve global dominance over various businesses built around our core competencies, through continuous product and technical innovation, customer orientation and a focus on cost effectiveness".
All along Lalbhai Group has maintained a responsive yet levelheaded attitude towards the society and its training individuals to create a corporate culture that fosters excellence. Working in this direction the company has created a learning environment that nurtures individual talent and intellect. It provides a platform that challenges the individual capabilities urging them to constantly strive forward towards greater heights using development as the fundamental tool. It infuses in individuals a spirit of entrepreneurship which gives courage and conviction to pursue set goals towards logical achievement and a global mindset that transcends geographical and cultural boundaries evolving as a world leader. All this is manifest in an environment fostering innovation and leadership. Drawing from the Team based structure to encourage individuals to mesh up into cross-cultural teams in all operational processes. This process provides opportunities for individuals to match their capabilities with organizational expectations creating a mechanism for updating the system. A strong sense of ownership and commitment towards the organization and the business as a whole is the basic premise of all the company actions.
COMPANYS MISSION
Arvind limited. has laid down certain aims and objectives to be achieved while pursuing its corporate activities. These are: To provide a favorable work environment to the employees to direct their working towards achievement of corporate goals. To provide opportunities creating a mechanism for updating the system To manage the institution as a trust, as empowered leaders and do all that needs to be done ethically for the purpose of the institution. To create a vibrant institution for the future of this nation and the world at large To be a world leader in an environment fostering innovation and leadership. To reinforce connections, and catalyze the chemistry that allows connections to be translated into action which is beneficial for both the organization and the individual. LOVELY PROFESSIONAL UNIVERSITY 24
COMPANYS PHILOSOPHY
"It is my responsibility as a leader to create an environment where excellent people would like to come and give their best, to create a vision, to give freedom for excellence." - Sanjay Lalbhai (Managing Dir.) We believe in potential of every human being. Our Human Resource Development policy reflects this belief. We recruit the best talent wherever we do business, offer competitive compensation, provide a dynamic work environment, make people accountable for results, and chart their growth through systematic career planning. Our structures are well defined which allows us to be more flexible and respond to the customers promptly. We encourage innovation and entrepreneurship and motivate our people to take on leadership roles through job re-assignments. This helps us create a learning organization with a workforce that has multi-dimensional experiences and skills. Our campus recruitment program and on-going involvement with educational institution ensures access to highly trained managers, engineers and workers to support our aggressive global plans. And our training centers FOUNTAINHEAD (the hub of all training activities at Arvind), INDRADHANUSH (for operatives), ORCHID (for behavioral training), and CALCULUS (for computer training) ensures they continue to learn and grow.
FUNCTIONING OF THE ORGANIZATION

Each Strategic Business Unit is headed by a Business Head. There are also small garment units at Asoka and Retail outlets at Naroda. The organization has adopted a Hybrid Structure to be more responsive to the changing markets in which the Functional and the Divisional structures are combined together. As the organization grew larger with several products and markets, it typically organized into selfcontained divisions. Functions like marketing, which is important to each product or market are decentralized to the self-contained units. However, some functions like Finance, MIS, Legal and Secretarial, Taxation and Services that are stable and require
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economies of scale and in-depth specialization are centralized at Naroda Corporate headquarters. Each of these departments provides services for the entire organization. The main product divisions are Denim, Shirting, Knits and Central Utility that are created to serve a different market. Individually, they all require a different strategy and management style. Each product Line Head is in charge of all functions of that product such as marketing, planning, supply and distribution, and manufacturing. There is no Matrix reporting, which means that they follow one-to-one reporting. The Supervisors will report to the Functional Heads or Managers and the managers in turn will report to the Managing Director who is the apex of the organization. EMPLOYEES The company in all is operating on strength of nearly 3000 managerial cadder employees and approximately 15000 first line managers. Employees are all qualified and technically efficient to serve its clients. Employees are given training of all the products and services so that they can serve its clients better. Company has a healthy incentive structure for its employees. TURNOVER The approximate turnover of the company was Rs. 2344.99 crores (as per current financial year 2008-2009). GEOGRAPHICAL SPREAD Arvinds worldwide network facilitates Global account management for the leading brands and local customers. With offices in New York, London, Bangladesh, Delhi, Ahmedabad, Mumbai, and Bangalore, Arvind has made itself ready to attend to its customers anywhere on the Globe. Besides their global offices, they have independent and devoted sales force for all locations and dedicated resources for key accounts.
COUNTRYWISE EXPORT FOR DENIM (CONTRIBUTION IN %)
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DENIM MANUFACTURING PROCESS
BRIEF ABOUT OPERATIONS
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Arvind Limited has carved out an aggressive strategy to verticalize its current operations by setting up world-scale garmenting facilities and offerings a one-stop shop service, by offering garment packages to its international and domestic customers such as Lee, Wrangler, Arrow and Tommy Hilfiger and its own domestic brands such as Flying Machine, Newport, Excalibur and Ready to Stitch (RTS) previously was Ruff & Tuff. It has now become the largest producers and Exporters of Denim Fabric in the World. Talking about the Operations Our Arvind Limited follows is that they purely focus on Customer Centric Approach i.e. Customer gives a Samples of Fabric to Marketing Department according to their Requirements and then after working of departments such as DNTG, Spinning, Dyeing and Sizing, Weaving, Quality Assurance, Inspection, ISO starts. The Management Staff and Workers are well trained to handle each process and the Machines for operations are workers friendly i.e. Workers know their part, which machines indicate. The worthwhile thing here is Companys total dedication on Quality Management by having departments such as Quality Assurance and Development and New Technology Group. Not only this but also they take samples after each processes which will be explained in detail hereafter. As we come to know that Arvind Limited produces different Fabric such as Denim, Cotton Shirting, Trousers, Bottom weights and Knits. We have visited the Procedures for manufacturing Denim Fabric and this starts from Spinning, Weaving, Dyeing, Finishing, Quality Assurance, DNTG, Inspection, ISO + EMS, Marketing and HR. To start with, generally our idea was just that ARVIND LTD. produces Denim Fabric and we are unaware about the Processes they use from Procurement of Cotton fibers until the End Product that is Finish Fabric (a saleable Product).
PROCESSES LOVELY PROFESSIONAL UNIVERSITY 29
Before producing a Final Fabric of Denim i.e. wearable Fabric, it passes through different routes and as discuss earlier that we have visited different process departments on the basis of time-table given below. INDUSTRIAL PROJECT INDUCTION TIME TABLE DATE 3-07-2010 05-07-2010 06-07-2010 07-07-2010 08-07-2010 09-07-2010 10-07-2010 12-07-2010 13-07-2010 TIME 10:00 hrs to 15:00 hrs. 10:00 hrs to 15:00 hrs 10:00 hrs to 15:00 hrs 10:00 hrs to 15:00 hrs 10:00 hrs to 15:00 hrs 10:00 hrs to 15:00 hrs 10:00 hrs to 15:00 hrs 10:00 hrs to 15:00 hrs 10:00 hrs to 15:00 hrs DEPARTMENT NAME Spinning Weaving Dyeing Finishing QA DNTG Inspection ISO+EMS Marketing Devesh Shah Dipak Pandya Hitesh Shah KB Shah Pranab Karmakar Rahul Roy RT Shah Ajay Dwivedi Smita Deshpande
SPINNING
LOVELY PROFESSIONAL UNIVERSITY 30
First, it is worth to note that Production is evergreen line, without production no single manufacturing company survives in this competition market.
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Procurement of cotton is done based on the Cotton Testing Laboratories by checking Cottons Length, Strength and Uniformity. Then they Co-ordinates with Spinning Department to start with producing yarns, but this were just for procurement of cotton for Spinning Department. COTTON SPINNING HAS 4 TYPES OF PROCESS: Ring Spinning Rotor Spinning or OE Spinning Adjudge Spinning Trap-Frictions Spinning To manufacture a Denim Fabric Arvind Ltd. uses Rotor Spinning or Open-End Spinning Processes and Ring Spinning is used at our another Business Divisions that is Ashoka Spintex. Spinning Department produces 60 tones of Yarn with potential of 24 Rotor Spinning Machines by having different counts and that is Thicker (Coarser) which is used for Denim and within counts of 5.3 to 20 and the thinner yarn is used to manufacture Shirting and Trousers within counts of 30 to 160. They are having Open End Spinning Process for making Yarns and in this Cotton are passed through four different routes to produce a Yarn: Blowing: - In this blower machine Cotton passes through various kinds of blowing machines to remove impurities such as Fibers, seeds etc. Carding: - In this again cotton passes through a machine to open its individual fibers and again impurities is removed if found. After this process, cotton takes a form of Slivers in which cotton base is mentioned and directly goes into cards. There three Liners and each liner are having 12 Cards so there are 36 Cards in total. Draw- Frame (Drawing):- After Cards have been prepared, it is considered as a Frames and it goes for Breakers and Finishers. Breakers draw this Card into double productions and Finisher is Single Automated machine to do the same work as Breaker. There are total eight Breakers and eight Finishers. Then after the above three process, it goes into the Final yarn making machine which is known as AutoCoro. It continuously keep a watch on production of yarn and any deviations found it gives Red indication on Machine so that operators try to resolve that.
Now if we compare between Rotor Spinning and Ring Spinning Process then Rotor Spinning (Open-Ended) is economically viable for the Production of Denim yarn because it deals with the less number of processes then Ring Spinning.
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Rotor Spinning Blowing Carding Draw-Frame Yarn Final Packaging
Ring Spinning Blowing Carding Drawing-Frame Roving Frame Ring Frame- Yarn Winding Final Packaging
DYEING AND SIZING

After Spinning department producing yarns and then after converts it into warp beams it is then transferred to the Dyeing and Sizing Department for the further processes. Mainly they used natural indigo dyeing in producing Denim Fabric and as per the requirements of customers, they also used multi-colored dyes such as Black, Blue, Navy Blue, Green with the help of Sulphuric Colors.
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Dyeing and Sizing department uses two Approaches for dyeing the warp beams and Sizing of it. I. Sucker Muller ( Warp Dyeing) II. Rope Dyeing SUCKER MULLER:- Generally there are 320 to 400 number of ends in a warp beams, in addition, this machine can handle upto 12 Beams in one go. In this machine, it follows some process such asa) The machine starts with the warp feeding motor which pick yarns and rotates it in a clockwise direction in which left roller rotates the yarns into upwards direction and right roller rotates a yarn into downside direction. b) Then comes the stage of Preventive motor which works for pouring of yarn and it clean yarns by removing impurities if any. c)In the third stage, washing of yarns is done at 50 .C and shades can be decided. This is also called Pre-dye wash. d) Then after there is a Dyeing zone and there are six such zones are there. First of all Indigo dye is applied i.e. coated on yarns and such process is continued for this six zones with Coating and Oxidization of yarns to remove unnecessary indigo from yarns so that it maintains its width of weaving ability. e) Now this machine takes dyes from all tanks and absorb to the surface of yarns and the remaining dye taken care by absorber tank to reuse such dyes and reduce wastages. After six zones of dyes, it washes 10 times to remove the indigo from the surface. This is also called post-dye wash to decide the shades for the fabric. f) Then a stage of dryness comes into account to maintain yarns strength. Maximum 7% moisture is used to make a dye yarn dry. Thereafter 10 separations are there to make yarn to go for beams with the help of combing metals i.e. separation of number of ends takes place and directly sizing part is done. However, the point here is to note that after fulfilling each beam requirement the cutting part is done without stopping he machine and output with the help of compensators. The compensator compensates the yarn until the next beam is ready to take it for sizing.
Each Sucker Muller machine involves four workers to handle it. The dyeing can also be done as Sulphur Bottoming and Indigo topping (SBIT), Indigo Bottoming and Sulphur Topping (IBST), Yellow Bottoming Indigo Topping (YBIT), Indigo Bottoming Green Topping (IBGT). This method of Dyeing is also known as Warp Dyeing.
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ROPE DYEING:- In this method a warp beams first converts into rope beamersand then transfer to the 50 Rope Dyeing machine for the further process. Rope Dyeing has verifies certain process for dyeing yarns. a) Creel Section:- In this section 50 balls are setup at creels with generally 400 to 430 ends. Creels setup is as follows
b)The first section is known as setup section but after that it comes the machine layout portion i.e. there are 19 Boxes through which Rope passes for various parts as follows:Box No:1. ) 2,3,4.) 5,6.) 7 to 14.) Dyeing Process 15 to 18.) Post-Dyeing Process Process Name Scoring Process ( Washing) Pre-Dye washing Process Shading Process Activity If found Impurities of Yarns removed. Before Dyeing washing of Ropes. Shading taken care as per requirement. Indigo Tank do dyeing process for about 8 times i.e. Ropes enters and exit 8 times from this tank. After Dyeing process this boxes gives a wash to Ropes to remove unnecessary dyes from surface of Ropes with the help of detergent. At this stage dryness of Ropes taken care with the help of softeners. Opening of Ropes is done after Process. 50.C N.A N.A Effluent Treatment Plants* Temperature 70.C
19.)
Softener Process
N.A
* Effluent Treatment Plants is helpful in making a solid form of Indigo waste and make (pH) level neutralize a) Dry cans and Coilers: - In this drying process is carried out through Cylinders and Coilers are used to make Quality arrangements and to make 400 to 430 ends separate from individual Ropes. LOVELY PROFESSIONAL UNIVERSITY 36
The Impact of this Process is that Dyeing Process is done with the possible nearest accuracy and efficiency but it involves more cost than Sucker Muller in respect of Machinery, Workers Skills and Working Environment. It gives 5 times more Production than Sucker Muller. Here Quality is more focused in terms of Purity issues of Indigo. It gives better penetration of Indigo on Ropes (Yarns) as Dyeing is done 8 times. It has a capacity of setting 40,000 meters at a time. Indigo extracts from plants that are naturals and there are synthetic dyes. We must know that Indigo is Insoluble element and to make it applied on the Ropes (Yarns) Caustic is added to the Indigo to make it soluble. Still this is not enough this just a formation of Soluble but to apply on surface of Ropes it requires a pathway, which is given by Hydro, and it makes the (pH) in its acidic media so that Indigo is directly applied to the Ropes (Yarns). The basic difference between Warp Dyeing and Rope Dyeing is that in Warp DyeingDyeing and Sizing Process goes together whereas in Rope Dyeing the focus is mostly on Dyeing Process and then after the Ropes is filled into cans and then Ropes are opened as a Warp and thereafter Sizing part is done. This department consists of 36 staff in three shifts and apportion of such workers are as follows:Balls Loading = 2 Workers Patrolling and Platform Visit (Continuous) = 2 Workers Coilers Handling = 2 Workers Operators Office = 3 Staff (1 Operator, 2 Asst.Operator) Filling Indigo Tank = 3 Workers The above details are for one shift and there are three such shifts are there. Therefore this activity is also known as Labor- Oriented activity because the likings of Damages are more in this Dyeing Process as if any individual Rope breaks then it creates a problem of lapping on Rollers and due to such Machine has to be stopped because of such Breakages, and stopping of Machine creates Machine Idle Problems. Therefore, for this two workers keep a continuous watch on Rope Dyeing on Platforms.
WEAVING
After passing through different processes such as Spinning, Warping, Dyeing and Sizing this is a stage where Raw Fabric is processed and then finally it goes to Finishing Department. Now this stage is processed through Zax a loom set which is basically a model of Machines. These Machines works with a speed of 700 to 750 Rotations per Minute (RPM). There are 203 Machines out of which 159 are Zax Machines and 44 (209i) Machines. There are 135 meters per Roll as per customers requirements and after making a Raw Fabric, it generally goes for detecting the defects. Generally, yarn is produce from cotton, filaments, lykra, Polylykra. Warp Beamers first installed to the Air jet loom set, which is Technology from Japan (Tsudakoma) and then after a weft is entered into nozzles through air pressure. LOVELY PROFESSIONAL UNIVERSITY 38
Warp is seen vertically on these machines and weft is horizontal to it. Weft enters through censors and passes the full lobby of warp and the dents of warp are set before starting the machine. Dents are defined as gap between two ends. The larger the dents the lesser will be the gap between two ends. Generally, one machine produces 500 meters of Raw Fabric daily depends on picks. In addition, to produce in such a hassle environment you need to have 75 to 80 % of humidity required in every textile mills and due to this 10% contraction of fabric takes place in weaving department. There is inflow of cool atmospheric air from above floor and outflow of air ventilation is given at underground level. There is air blower attached on the above of such machines to remove unwanted fibers on machines, which is continuously rotating for cleaning purpose. After one beam is over there is a need for knotting to have a continuous production for Raw Fabric and for that, this department is having a Knotting machine to join the next beam. There are indicators on each machine for the Terminologies such as T- Total Breakages W- Warp Damages F- Weft Breakages L- Leno and other Breakages. This indicators help operators in make out damages that occurs due to Dyeing and Sizing and sometimes due to weft also. Weft is procured from outside suppliers, so if there are more damages or breakages of weft then suppliers are to be aware and they will have to give more focus on these breakages. Due to hassle, working environment workers are given Earplugs and Masks due to humidity level. There are 100 workers in a shift and total there are 3 shifts and approximately 300 workers work in this department. Recycles wastewater and converts denim waste to denim paper, in keeping with their eco friendly production process.
FINISHING
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This department tries to maintain Quality, Production level, and Transparency like other departments and keep liaison with other departments. This department has three processes and any process can be by-pass as per customers requirement. They are as follows: SINGEING DESIZING
c) MERCERIZING
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a) SINGEING: - In this process cotton fabric, hairiness, improper slubs are removed with the help of three burners at 900.C. The burning takes place in one goes i.e. Fabric passes through these 3 burners at a one go. In this process route of fabric is decided automatically and each customers fabric has its own identity or code number. b) DESIZING: - This is generally a process called over-dyeing process. Sizing has already done in the sizing department after dyeing process but in this process overdyeing is done to get a good idea of finished fabric. A machine called harrish helps in process of making wrinkle-free denim fabrics with the help of certain chemicals. It has ability of making permanent stability characteristics on fabrics. Desizing part is done with the help of Dhall Machine. c) MERCIRIZING : - In this process lustrous, shrinkage and dimension stability of fabric is taken care with the help of same Dhall Machine. Caustic and Alkali is used in wash tank to know the maximum shrinkages in fabric takes place. After a fabric passes through this process, it directly goes to a Acid-Wash Tank in which the unnecessary alkali is removed from a fabric. The above machines costing around 4 to 5 crores and has ability of making process on 40,000 meters per day. While there are other high speed machine which gives heavy production (Approx. 75,000 meters per day). This High Speed Machine is known as Benninger Impacta-Extracta. In this, all the above 3 process is done on a single machine. As compared to previous process, this is having high potential to maintain Quality as it can handle a large production. There are other two machines are there namely Ordinary Drying Range (ODR) and Ordinary Drying Range + Wet finishing which focus on all process as per customers requirement. There are 18-19 Machines in this department and to handle this there are 90 workers working in three shifts i.e. 30 workers are required per shift.
QUALITY ASSURANCE
Every time we talk about Quality and its Management, but this is not talk in the air, we have certain Quality Parameters of Testing it and maintain it. This department process comes into center part of process but their working starts at the initial stages from procurement until final fabric. Firstly, a customer gives a sample as per their requirements and then it directly goes to DNTG department to check its ability to produce such kind of fabric. After this process, DNTG group advises to procure cotton for making yarns for such production. However, Quality Assurance department to know the strength of the cotton checks cottons length, uniformity and frequency. This Department also checks coarseness of fibers. They take care about trash, and evaporations in process of cotton. Without Verification (Standardization) of this department, no single gram of Raw materials enters into machine. LOVELY PROFESSIONAL UNIVERSITY 42
The working cycle for Quality Assurance Department is as follows: -
Cotton Laboratory
Small Garmenting Division
Chemical Laboratory
Sample check cell
Certification
Clearance and Complaint Process control
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Development and New Technology Group
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The objective of this department is to develop samples as per customers requirement. They develop new yarns and fibers and some of their developed categories are Lenin Denim, Polyester Cotton Denim and Shades of fabric dyes. As mentioned above, they receive samples from marketing for development. Fabric construction and analysis part are also work out here. One authorized member from DNTG keeps liaison with dyeing department, and make plans for dyeing and sizing, weaving, finishing. They also offer fabrics to inspection department for inspecting damages and rate category of fabrics. They do their research in their chemical laboratory for developing the shades for dyeing. The flow chart for their process after developing a new product is as follows: Trial in the Machine (Developed Product) Checking Width of the Fabric Checking the Shades of the Fabric Commercialization of such Product
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INSPECTION
Irrespective of damages are there or not, the work of inspection department is to inspect 100% production. There are four point grading system which is worldwide accepted. Inches Point Defects 0.3 3.6 6.9 > 9-1mtr 4 1 2 3
They also categorized fabric into a Quality Table starting from nine to one, in which 9 shows the best Quality and 1 shows appropriate Quality for certain customers. Damages can occur from Core Production departments such as Spinning, Dyeing Sizing, Weaving, and Finishing. Due to Spinning the defects such as slub yarn variations, coarseness of weft, etc. may occur. Due to Dyeing Sizing defects such as slackage in ends, tightened problems, Shade variations due to machines, size-patch damages, etc. may occur. Due to weaving defects such as stop-marks, Pick findings, snarls and floats, etc. may occur. Due to finishing defects such as skewness, shrinkages, width and weight of fabric, etc. may occur. LOVELY PROFESSIONAL UNIVERSITY 46
Inspection department uses Kitamura Machine to find such defects in fabrics. There are two inspectors to keep continuous watch on fabric for finding the defects. The 4point grading system indicates that as per customer requirement defects are allowable upto their levels. We have observed that in VF brand the 4-point allowable are only 4that is total 16 defects per 135-meter roll.
ISO and EMS
Arvind Limited integrates both QMS and EMS, which comes under the head of ISO. LOVELY PROFESSIONAL UNIVERSITY 47
Since establishment of ISO Arvind Limited were by certified the ISO. Different Quality parameters have to be focus upon and each machine is checked and approved by centralized laboratory. List of all the process, activities, procedures, record of workers, machines, and work allotted to whom, list of instructions for all the workers and everything is recorded by the HR department and if any change is to be made, first it should be informed and permitted by Marketing representative. INTERNATIONAL ORGANIZATION FOR STANDARDIZATION ISO 9000 is a family of standards for quality management systems. ISO 9000 is maintained by ISO, the International Organization for Standardization and is administered by accreditation and certification bodies. The rules are updated, as the requirements motivate changes over time. There are 176 member countries. ISO 9001 : 2008 is the fourth revision of ISO 9000. All requirements of ISO 9001:2008 are generic and are intended to be applicable to all organizations, regardless of type, size and product provided. Before certification the agents of ISO takes Assessment audit and Certification audit: i. ii. ASSESMENT AUDIT: Here the assessment is done on the systems and process of the company before certifying. CERTIFICATION AUDIT: An ISO committee selects their agents and based on the finding they recommend the company for certification.
Some of the requirements in ISO 9001:2008 (which is one of the standards in the ISO 9000 family) include: - A set of procedures that cover all key processes in the business; - Monitoring processes to ensure they are effective; - Keeping adequate records; - Checking output for defects, with appropriate and corrective action where necessary; - Regularly reviewing individual processes and the quality system itself for effectiveness; and - Facilitating continual improvement ISO is all about: ' Say what you do, and do what you say. QUALITY MANAGEMENT SYSTEM The Company documents, implements, and maintains a quality management system and continually improves its effectiveness in accordance with the requirements of the ISO 9001:2008 International Standard. It is managing quality in a systematic way. The industry has to follow PDCA cycle to get continual improvement:
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It is a cycle, which focuses on how one should approach in his all the activities. First of all planning is required, than according to the plan one should work upon and after that it should be checked that whether the work is proper or not and lastly if the work is proper and correct it should be done again and if not than should plan for another work or project.
ACTIONS:The actions are of two types according to ISO 9000: CORRECTIVE ACTIONS PREVENTIVE ACTIONS i. CORRECTIVE: Any action taken after the occurrence of the problem is corrective action. It prevents the reoccurrence of problem. ii. PREVENTIVE: Any action to prevent the occurrence of the problem is preventive action. Company with most Preventive actions is the Best Company. The employees working in that company will be proactive. However, it is very difficult to implement in real life situations.
AUDITING:
Two types of auditing are required to become registered to the standard: a. Auditing by an external certification body (external audit) and b. Audits by internal staff trained for this process (internal audits). Audit should be always Cross Functional and it is meant to improve systems. Non-conformities are not confirming to the requirements and are tool for improvements. ISO 9000 is a system certificate not a product certificate. It is beneficial for both customer and the company itself. LOVELY PROFESSIONAL UNIVERSITY 49
It is not mandatory but depends on the company itself whether it wants or not. The process is Audited every six months. ADVANTAGE TO CUSTOMER: - It gives confidence to the customer that he will get consistency and Improvement in the quality and the service provided by the company. - He will not feel hesitate to use that product which is ISO certified. ADVANTAGE TO SUPPLIER: - Repeated customers - Improvement in process - Addition to the customer base - Wastage in the process will be less - Inventory carrying cost will be reduced. - Gets more liquidity as money doesnt get block - Can cater more products to the customer The validity of the certificate certified by ISO is for 3 years and on the completion of this validity, recertification is done and in Recertification, Assessment audit is not done. Every six months the agents come for Surveillance, they pick up any department and any worker randomly and than check, whether the procedure is as said earlier or not. In the cycle of three years, it should be noticed that each department is audit at least once.
ENVIRONMENTAL MANAGEMENT SYSTEM

ISO 14001 was first published in 1996 and specifies the actual requirements for an environmental management system. It applies to those environmental aspects which the organization has control and over which it can be expected to have an influence. Environment under this system means the surrounding around the organization not within the organization. There are four types of pollution: 1) Air pollution 2) Water pollution 3) Noise pollution 4) Land pollution Air pollution is done by the Gases, which comes out of the chimneys, and the chemicals, etc. Gases like CFC gases, carbon dioxide, etc are such gases, which effect and destroy the air adversely. Land pollution is done by the dye chemicals, which mix with the water and make it harmful to use and because of this, the land is polluted. Noise pollution is due to the excess noise of the machines, which is harmful for human beings. Water pollution is due to the wastage of chemicals, dyes, indigo, which comes out of the machines while coloring, dying washing, etc... Significant actions should be taken to control these pollutions and its harmful effects LOVELY PROFESSIONAL UNIVERSITY 50
and for this EMS, 14001:2004 is made. Arvind Limited uses EMP i.e. Environmental Management Process, which makes the waste and polluted water useable by removing the sludge from it to neutral the Water. The particle, which comes out of the polluted water, is to be thrown away in a place as ordered by the government. Those particles are very dangerous and harmful and it should be transported very carefully and even care should be taken that the particles do not fell down while transporting. This process makes the water neutral and useable after processing through Effluent Treatment Plants. For Air Emission i.e. Stack Emission should be minimized. The pollution should be within the permissible limits granted by the government.
For Energy, there are programs to see that the energy consumption goes down. There are objectives which they make to minimize the energy usage ant also target are set up that under a certain limit the energy has to be consumed not more than that. For natural resources, the company is seeing that the water consumption should be adequate and wastage should be minimum. Cotton, which is also natural resources, its consumption should be maximum and wastage should be minimum. in addition, should be reduced in every stage
INTERNATIONAL MARKETING
Country-Wise Exports for Denim (Contribution in %)
30% 30%
U.S.A U.S.A Europe Europe 55% 55% Middle-East Middle-East (Bangladesh, Turkey, (Bangladesh, Turkey, Sri Lanka) Sri Lanka)
15% 15%
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Arvind Limited is India's largest integrated textile company and operates across the entire value chain from designing of fabric to brands. Arvind Limited was the first company in India to bring international brands when they brought Arrow to India. Arvind has licensing relationships with many international brands like Arrow, GANT US Polo & Cherokee. They also have JVs with VF Corporation with brand portfolio of Lee, Wrangler, Nautica, Jansport, Kipling, Hero by Wrangler & Lee Riders, Tommy Hilfiger and most recently a JV with Diesel. The Marketing Strategies are different as per Geographical Indicators. For Example: - Particularly for Europe countries, Fabric have category named as Euro-line. The Europeans wants depth of color (Darkness in Fabric). The Company believes in Secured Payment, therefore, it gives no credit to any of its customer but can give terms and conditions of L/C. The Pricing Quotations are different as per customers convenience i.e. F.O.B or C.I.F. They follow the ethics on Fabric such as Width, Weight and Ounces. These are carefully observing and try that none of these have been tampered.
Lee & Arrow for the super premium segment
Flying Machine & Excalibur for the premium segment LOVELY PROFESSIONAL UNIVERSITY 52
Newport for the economy and
Innovative Ruf & Tuf for the mass market The company has recently made a foray into children segment by introducing Lee Youth, Ruggers Kids & Newport Kids. Similarly in tie-up with Cluett Peabody, USA, to manufacture and market their world famous Arrow shirts, it launched what is todays Indias most inspirational brand of dress shirts. In a world without boundaries, Arvind FABRICS are equally universal in their appeal. Arvind aims to enrich lifestyles globally, inspiring diverse customers with the beauty of their fabric. Arvind was already making shirting for the Indian market. In 1990, it decided to focus on high value shirting, so as to expand their markets beyond India's borders. As a part of their commitment to being a value-adding partner to each of the customers, Arvind Shirtings have invested US $ 100 million in Santej. This plant has an annual capacity of 34 million meters of 100% cotton woven. Arvind's philosophy in manufacturing is 'Excellence in Quality and Flexibility in Production'. In the entire process of operations, eco-friendliness is critically monitored and ensured. The plant is also configured to handle small order sizes as well as very long order lengths with consistent quality. Arvind has recently set up a dedicated bottom weights plant as part of Arvind Polycot Limited. This new addition to the Arvind Textile Complex brings the total investment in the complex up to Rs.12000 million. The plant is an integrated facility that sources yarn from Arvind at Ahmedabad. It has both weaving and processing infrastructure, captive power supply, steam generation and a wastewater treatment plant. The latter makes it a zero discharge complex i.e. one that recycles all its wastewater. In 1986, we looked for textiles that had global demand, high margins, and high entry level barriers (either of technology, expertise or set-up costs), and very importantly, low "fashion volatility". We wanted to focus on fabric that would never go out of style. Our analysis of potential products threw up denim as the answer. With a production
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capacity of 120 million meter per annum, Arvind is currently Indias largest and worlds third largest denim manufacturer. It sells under the brand names ARVIND DENIM and BIG MILL DENIM (in Europe). In India Arvind commands a market share of approximately 64% which is five times that of the next largest player. Our denim is used to make Indias leading jeans brands Flying Machine, Killer, Levis, Numero Uno, Pepe, Texas jeans, UFO and Wrangler. All the leading local denim manufacturers use Made from original Arvind denim as an indicator of high quality and consistency. Arvind also exports denim to over sixty-six countries worldwide. Denim exports constitute of approximately 50% of the turnover. Today Arvind is making yet another foray in the manufacture of the finest quality Cotton Knits in the world. This new venture features a technical collaboration with Alamac Knits Inc, USA to manufacture high value and high-fashion knits. With an investment of US $50 million, the plant will produce fabric in both tubular and open widths. The product range aims to offer widest choice in both tubular and open widths in single (Jersey, Pique, Textures, Pointless, Fleece, French Terry, Jacquards in solids, feeds and automatics) and double (Interlocks, Needle-outs, ottomans, Pointless, Textures, Reversible, jacquards, Ribs in solids, feeds and automatics, Collars: Plains and Jacquards) knits. It will manufacture a knits range from casuals to formal, active wear to sleepwear, for diverse use in men's, women's and children's clothing. Arvinds large color and fabric library, stocking samples and a well equipped fabric resource centre facilitates customers to access fabric that will enhance their lifestyles.
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A in rv d
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PORTFOLIO OF ARVIND LIMITED
Portfolio Denim Shirting Garment Brand/Retail Others
Percentage% 26% 11% 16% 21% 26%
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MILESTONES ACHIEVED
1930
Arvind Limited was set up by Lalbhai Brothers.
1934
With sales reaching Rs. 45.76 lakhs and a profit of almost Rs. 3 lakhs, Arvind establishes itself amongst the foremost textile units in the country.
1985
First Meter of Denim churned out.
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1986
An uninterrupted record of not missing out on paying dividend to its shareholders. An established leader in fine & superfine cotton fabrics for Indian market. Renovation: First company to bring globally accepted fabrics Denim, yarn dyed shirting fabrics & wrinkle free gabardines to India.
1987
The largest zero discharge green effluent treatment plant in India. Commitment to greener world. First company to bring International shirt brand Arrow to India First company to start dedicated retail outlets for Arrow brand Awarded various awards for Highest exports and ISO.
1989
Largest denim & shirting in South Asia. 3rd Largest denim capacity in the world.
1990
Introduction of Premium Shirtings Division.
1993
Office set up in New York, London & Hong Kong.
1994
Arvind ventures into BrandsFlying Machine acquired.. BEGINNING OF AN ERA
1995 1997
LEE commenced production. Introduction of Ruf & Tuf, ready to stitch denim. Commission of State-of-the-art manufacturing unit at Santej (Ahmadabad). First Indian company to detribalize the cotton textile business from cotton fields to apparel retailing.
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19971998 2002 2004
First company to introduce ERP SAP business solutions.
Arvind` does a unique financial restructuring. Relocation of Mauritius Plant at the end of quota regime.
2008
Company launches 'Mega mart', now India's largest value apparel-retail chain Largest portfolio of International brands: Lee, Wrangler, Nautical, Jan sport, Kipling, Tommy, Arrow, US Polo, Izard, Pierre Cardin, Palm Beach, Cherokee, hart Schaffer Marx.
FINANCIAL SCENARIO
Arvind limited is acclaimed in the Indian corporate field for its financial skills. Being the phase of rapid growth or downturn the company has demonstrated swift, sharp and robust financial acumen to navigate the company through different phases of economic cycles. Arvind Mills was the first Textile Company from India to issue GDRS in the year 1992-93. Highly complex financial restructuring exercise involving more than 80 domestic and international tenders, who the company implemented following the major downturn in the business cycle during year 2000-2002, is considered to be the benchmark for the Indian corporate. Arvind limited has been making judicious choice of fund leasing avenues in the domestic as well as international markets so as to utilis very efficient capital structure, which is in the tune with operating risks and enhances the shareholders value. The company has laid down the risk management policy to manage the financial risks emerging out of currency and interest rate. It runs an active treasury desk so as to make use of modern hedging tools available to manage financial risks.
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Arvind Mills was the first Textile Company in India to implement ERP, SAP as back as in the year 1997-98. The company follows best accounting practices to prepare its financial statements as envisaged in the Indian and international accounting standards
SHAREHOLDING PATTERN OF ARVIND LIMITED

Particulars NO.OF SHARES % OF TOTAL
Promoters Institution General public Grand total
76908767 42340700 98980382 218229849
35.24% 19.40% 45.36% 100%
GRAPHICAL PRESENTATION OF NUMBERS OF SHAREHOLDERS
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FROM OLD
TO NEW
Arvind limited is the flagship company of the Lalbhai Group and one of Indias largest integrated textile manufacturers and branded apparel retailers. The re-branding exercise comes in the wake of Arvind limited transforming itself from a pure fabric company to a diversified business group focusing on branded apparel and retail. Initially, when the company was set up as Arvind Mills limited, it was simply about fabric. But gradually, it has spread its tentacles into retail and branded apparel, which today contributes the maximum to the companys growth. Seven years ago, with everything else constant, the logo was changed. In all, since Arvind Mills was set up in 1931, this is the first extensive re-branding exercise it has taken up. Sharp, but well rounded, the forms of the logotype represent an organization that is integrated and works across the value Arvind Mills - old logo chain from stylish fabrics to iconic brands. With an element of classicism, the logo symbolizes an organization that has a rich heritage, while remaining contemporary through Arvindlimited - new logo changing times. The burgundy red denotes maturity, its rich tones carrying a sense of depth and more than a hint of passion. No particular font has been used for the logo it is hand drawn and, therefore, an LOVELY PROFESSIONAL UNIVERSITY 62
exclusively
crafted
logo.
Highlighting the significance of the change in identity, Sanjay Lal bhai, chairman and managing director, Arvind limited, says, Over eight decades, we have changed the face of fashion by evolving constantly. As we get ready to address wider opportunities to create wealth for our stakeholders, we have evolved new ways of thinking and a new direction. The new identity reflects the shift in the corporate identity from a large integrated textile player to a lifestyle solutions company and the name of the company reflects the same trust but new opportunities. Arvind limited has licensing relationships with international brands such as Arrow, Gant, Cherokee, USPA, Hart Schaffner Marx, Sansa belt, Pierre Cardin and a joint venture with VF Corporation, which covers Lee, Wrangler, Jansport, Nautica, Kipling and Tommy Hilfiger. In addition, Arvind owns a number of successful Indian brands such as Flying Machine, Newport, Excalibur and Ruf and Tuf. It also owns the retail chain, Mega mart, which has 83 outlets in 30 towns. Recently, Arvind limited opened a 40,000 square foot Mega mart outlet in Chennai.
ARVIND MILLS CHANGES NAME, FOCUS AND STRATEGY

Textile major Arvind Mills which has been recently going through a bad patch owing to rising rupee, reducing exports and falling margins is undertaking a business transformation in a bid to become a billion dollar company. The company has firstly changed its name from Arvind Mills limited to Arvind limited with a new logo and identity to reflect a company which is diversified with focus on branded apparel and retail. The promoters will increase their stake from 34% to 47% and infuse Rs.188 crore capital into the company. Also, half of the Rs.1400 crore debts which Arvind limited has would be repaid by selling off land at Ahmedabad and Bangalore thus positively affecting the companys profitability. Arvind is now giving more focus to brands and retail which until now contributes 19% of total revenue. It will also move to become an integrated textile player by producing fabric as well as retailing it. With a combination of its own as well as licensed brands, Arvind aims to become the largest apparel brand in India with focus on Tier II and III cities.
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Major emphasis would be on the value store format Megamart which is targeted to achieve Rs.1000 crore sales in 3 years. Other than that Arvind plans to setup 250 small format and 30 large format stores by 2012.The strategy may work out to be rewarding for the company as it has a good portfolio of domestic and international, and has been an established national player. The move would also help it to ward off any risk it faces from the recession in export markets.
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CONCEPT OF WORKING CAPITAL

A company invests its funds for long term purposes and short term operations. That portion of a companys capital, which is required for minimum stock of raw material to maintain continuity in production, minimum stock of finished goods to fulfill future
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demand, payment of wages and salaries of labourers and employees is called Working Capital. In other words, working capital is that part of the firms capital which is required for financing short term or current assets such as debtors, inventories, marketable securities and cash. The word working capital comprises of two words working and capital. In trade and industry, the word working with reference to capital means circulation of capital from one form to another during day-to-day operations of the business whereas the word capital refers to the monetary values of all the assets (tangible and intangible) of the business. There are numerous concepts of working capital as given by various accountants, financial experts, entrepreneurs and economists. Important among them are Balance Sheet or Traditional Concept Operating Cycle Concept
FORMS OF WORKING CAPITAL

Working capital is the amount of funds required to cover the cost of operating the enterprise. In other words, working capital may be defined as excess of current assets
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over current liabilities. It may be classified in two ways i.e. (i) on the basis of balance sheet concept and (ii) on the basis of time. These are illustrated by the following chart.
ON THE BASIS OF B/S CONCEPT

According to this concept, working capital is calculated on the basis of the balance sheet prepared at a specific date. It is further classified it two forms- gross and net working capital.
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o GROSS WORKING CAPITAL The gross working capital refers to the firms investment in current assets. The sum of current assets is a quantitative aspect of working capital which emphasizes more on quantity than its qualities. o NET WORKING CAPITAL - Net working capital is the difference between the current assets and the current liabilities or the excess of total current assets over total current liabilities. Net working capital may also be defined as, that part of a firms current assets which is financed with long term funds. The net working capital may either be positive or negative. When current assets exceed current liabilities, working capital is positive and negative when current liabilities exceed current assets.
ON THE BASIS OF TIME

Working capital is the amount required in different forms at successive stages of operation during the net operating cycle period of an enterprise. The duration or time required to complete the sequence of events right from purchase of raw materials/goods for cash to the realization of sales in cash is called the operating cycle or working capital cycle. On the basis of time working capital may be classified as (i) Permanent or regular working capital; and (ii) Variable or temporary working capital. o PERMANENT OR REGUALR WORKING CAPITAL;- It represents the irreducible minimum amount that is permanently blocked in the business and cannot be converted into cash in the normal course of business. It has following characteristics : a) It keeps on changing its form from one current asset to another b) The size of working capital grows with the growth of the business c) As long as the firm is a going concern, this part of working capital cannot substantially be reduced. o VARIABLE OR TEMPORARY WORKING CAPITAL:- Any amount over and above the permanent working capital is variable or temporary working capital. It fluctuates as per the change in the production and sale activities. It can further be classified in following two forms:
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a. Seasonal working capital The capital required to meet the seasonal demands of the enterprise is called seasonal working capital. It is of short-term nature and thus has to be financed from short-term sources like bank loan etc. b. Specific working capital Specific working capital is that part of the working capital which is required to meet unforeseen contingencies like slump, strike, flood, war etc.
COMPONENTS OF WORKING CAPITAL

Working capital refers to the metric valuation of the current assets and the current liabilities. These two are the basic components of working capital.
CURRENT ASSETS ARE:
(1) (2) (3) (4) (5) (6)
Inventories Sundry Debtors Bills Receivables Cash & Bank Balances Short term investment Advances such as advances for purchase of raw materials, component and consumable stores, prepaid expenses etc.
CURRENT LIABILITIES ARE:
(1) (2) (3) (4) (5)
Sundry Creditors Bills Payable Creditors for outstanding expenses Provision for tax
Other provision against the liabilities payable within a period of 12 months
SOURCES OF WORKING CAPITAL
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Funds available for a period of one year or less are called short-term finance. In India short-term funds are used to finance working capital. Two most significant forms of working capital are: trade credit, bank borrowing. The use of trade credit has been increasing over the years in India. Trade credit as a ratio of current assets is about 40 percent. It is indicated by the Reserve Bank of India that trade credit has grown faster than the growth in sales. Bank borrowing is the next important source of working capital finance. Before seventies, bank credit was liberally available to firms. It became a resource after eighties because of the change in the government policy. Another form of short-term working capital finance which has recently developed in India is Commercial Paper.
TRADE CREDIT
Trade credit refers to the credit that a customer gets from supplier of goods in the normal course of business. In practice, the buying firms do not have to pay cash immediately for the purchase made. It is a major source of financing for firms. In India, it contributes to about one-third of the short-term financing. Trade credit is mostly an informal arrangement, and is granted on an open account basis. Once the trade links have been established between the buyer and seller, they have each others mutual confidence and trade credit becomes a routine activity. Open account trade credit appears as sundry creditors on the buyers balance sheet. Trade credit may also take the form of bills payable. A bill is formal acknowledgement of an obligation to repay the outstanding amount. It also involves some credit terms. These credit terms refer t the conditions under which the supplier sells on credit to the buyer, and the buyer is required to repay the credit. These conditions include the due date and the cash discount (if any) given for prompt payment.
BANK FINANCE
Banks are the main institutional sources of working capital finance in India. A bank considers a firms sales and production plans and the desirable levels of current assets in determining its working capital requirements. The amount approved by the bank for the firms working capital is called credit limit. Credit limit is the maximum funds which a firm can obtain from the banking system. In the case of firms with seasonal businesses, banks may fix separate limits for the peak level credit requirement and normal non-peak level credit requirement indicating the periods during which the separate limits will be utilized by the borrower. A firm can draw funds from its bank within the maximum credit limit sanctioned. It can draw funds in the following forms: (a) overdraft, (b) cash credit, (c) bills discounting, and (d) working capital loan. a) OVERDRAFT Under the overdraft facility the borrower is allowed to withdraw funds in excess of the balance in his current account upto a certain specified limit during a stipulated period. Interest is charged on daily balances on the amount actually withdrawn subject to some minimum charges. b) CASH CREDIT Under the cash credit facility, a borrower is allowed to withdraw funds from the bank upto the sanctioned credit limit against the security of current assets. He is not required to borrow the entire sanctioned credit at once, rather, he can draw periodically to the extent of his requirements and repay by depositing surplus funds in his cash credit account. Interest is payable on the amount actually utilized. It is more flexible from borrowers point of view. c) BILLS DISCOUNTING Under the purchase or discounting of bills, a borrower can obtain credit from the bank against its bills. The bank purchases or discounts the bill and provides the amount within the overdraft limit. Before purchasing or discounting, bank satisfies itself as to the creditworthiness of the borrower. When a bill is discounted, the borrower is paid the discounted amount of bill viz. full amount of bill minus discount charged by the bank. The bank collects the full amount on maturity.
d) LETTER OF CREDIT LOVELY PROFESSIONAL UNIVERSITY 71
Suppliers, particularly foreign suppliers, insist that the buyer should ensure that his bank will make the payment if he fails to meet its obligation. This is ensured through a letter of credit (L/C) arrangement. A bank opens an L/C in favour of a customer to facilitate his purchase of goods. This arrangement passes the risk of the supplier to the bank. Bank will make payment to the supplier on behalf of the customer only when he fails to meet the obligation. e) WORKING CAPITAL LOAN A borrower may sometimes require ad hoc or temporary accommodation in excess of sanctioned credit limit to meet unforeseen contingencies. Banks provide such accommodation through a demand loan account or a separate non-operable cash credit account. The borrower is required to pay a higher rate of interest on such additional credit. COMMERCIAL PAPER Commercial paper (CP) is an important money market instrument in advanced countries like USA to raise short-term funds. In India, the Reserve Bank of India (RBI) introduced the commercial paper scheme in the Indian money market in 1989. Commercial paper is a form of unsecured promissory note issued by firms to raise short-term funds. The buyers of commercial paper include banks, insurance companies, unit trusts and firms with surplus funds to invest or a short period with minimum of risk. Given this investment objective of the investors in the commercial paper market, there would exist demand for commercial papers of highly creditworthy companies. In India, the issue of commercial paper is being regulated by RBI. Those companies are allowed to issue commercial papers which have a net worth of Rs.10 crore, maximum permissible bank finance of not less than Rs.25 crore, and are listed on the stock exchange. A company can issue CPs amounting to 75percent of the permitted bank credit.In addition to the above mentioned sources, accrued expenses and deferred income are other spontaneous sources of short-term financing. Accrued Expenses represent a liability that a firm has to pay for the services which it has already received. Deferred Income represents funds received by the firm for goods and services which it has agreed to supply in future.
OBJECTIVES OF WORKING CAPITAL MANAGEMENT

a. To minimize the amount of capital employed in financing the current assets. This will also lead to improvement in the Return on Capital Employed. b. To manage the current assets in such a way that the marginal return on investment in these assets is not less then the cost of capital acquired to finance them. This will ensures the maximization of the value of the business units. c. To maintain the proper balance between the amount current assets and liabilities in such a way that the firm is always able to meet its financial obligation whenever due. d. To ensure the smooth working of the units without any production held-ups due to paucity of funds. e. To ensure easy and cheapest availability of resources at the time of growth and expansion activities .
DETERMINANTS OF WORKING CAPITAL

The following factors should be considered carefully while determining the amount of working capital required: 1. NATURE OF BUSINESS The amount of working capital is basically related to the nature and the volume of the business. Firms engaged in public utility services require moderate amount of working capital whereas firms producing luxury goods require large amount of working capital. 2. SIZE OF BUSINESS Size is also a determining factor in estimating working capital requirements. The size may be measured either in terms of scale of operations or in terms of assets or sales. 3. CHANGES IN TECHNOLOGY Changes in technology may lead to improvement in processing of raw material, saving in wastage, higher productivity and more speedy production. All these improvements enable the firm to reduce the working capital requirements. 4. LENGTH OF OPERATING CYCLE The amount of working capital depends upon the length or duration of operating cycle. The speed with which the operating cycle is completed, determines the amount of working capital. The larger is the period, the more is the investment in inventories and wage bills.
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5. TERMS OF PURCHASE AND SALE A firm buying raw materials and other services on credit and selling on cash basis will require less investment in current assets as compared to a firm which purchases on cash basis and sells on credit. The period of credit and the efficiency in collection of debts also influence the amount of working capital required. The terms and conditions of purchase and sale are generally governed by the prevailing trade practices and by changing economic condition. 6. INVENTORY - Some concerns are force to hold large inventories in terms of raw materials or finished goods due to the reason of seasonal nature of availability, long distances, scarcity etc, in such case the working capital requires is more. 7. BUSINESS CYCLE Business cycle refers to the alternate expansion and contraction in general business activities. In a period of boom when the business is prosperous, there is need for larger amount of working capital due to increase in sales and rise in prices of raw materials. The contrary happens in the period of depression. 8. PROFIT MARGIN A high rate of profit margin due to quality products or good marketing management or monopoly power in the market, reduces the working capital requirements of the firm, as profit earned in cash is a source of working capital. On the contrary, firms earning low margin of profits due to competition or mismanagement need larger amount of working capital. 9. CREDIT POLICY A firm following liberal credit policy and thus granting credit facilities to all customers without evaluating the credit worthiness will require more working capital to carry book debts. On the contrary, a firm that adopts strict credit policy and grants facilities to customers with high credit standing will require less amount of working capital as funds tied-up in receivables will be released promptly for further uses.
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SIGNIFICANCE OF ADEQUATE WORKING CAPITAL

Adequate working capital is a source of energy to any business organization. It provides the following advantages to a business enterprise: 1. Adequate working capital enables a firm to make prompt payments to the suppliers and thus it can also avail the advantage of cash discount by paying cash for the purchase of raw material. 2. If a firm has adequate working capital, it can declare and distribute enough dividends when there are sufficient profits. This creates satisfaction among the shareholders. 3. In business, promptness to third parties creates goodwill and increases the debt capacity of the concerned firm. This in turn ensures uninterrupted flow of production. 4. A firm having adequate working capital and liquid assets can arrange loans from the banks on easy and favourable terms, as it provides a good security for the unsecured loans. 5. Adequate working capital has psychological effect on the directors and executives of the firm as it motivates them to work vigorously. It creates an environment of security, confidence, high morale and increases overall efficiency in the business. 6. Adequate working capital increases the productivity or efficiency of fixed assets in the business.
EFFECTS OF EXCESSIVE WORKING CAPITAL

Excess or redundant working capital refers to the idle funds which do not earn any profits for the firm. Inadequate working capital is disastrous; whereas redundant working capital is a criminal waste. A firm may suffer following disadvantages from excess working capital: 1. It may lead to unnecessary purchasing and accumulation of inventories causing more chances of mishandling of inventories, theft, waste, losses, etc. 2. Excessive working capital implies excessive debtors and defective credit policies causing higher incidence of bad debts that ultimately affects profits of the firm. 3. It indicates inefficient management of the firm. It shows that the management is not interested in effectively utilizing the resources and encouraging economy.
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4. Excessive working capital remains idle and earns no profits for the firm, even though interest has to be paid on it. This reduces the amount of profits. 5. It is an indicator of inefficient management. Hence, shareholders believe that they are not getting proper return on their investments. This results in lowering the value of shares causing discontentment among shareholders. 6. It promotes profits of speculative nature by stock-piling. It results in liberal dividend policy, but the management has to face difficulties in future when there are no speculative profits.
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(Rs in crore) Particulars SOURCES OF FUND Share holder fund Share capital Reserves & surplus Total Secured Loans Unsecured Loans Deferred Tax Liability TOTAL APPLICATION OF FUND Fixed Assets Gross Block Less- Depreciation Net Block Capital Work in Progress Investment
FOREIGN CURRENCY MONETARY ITEM TRANSLATION DIFFERENCE ACCOUNT
As at 31.03.09
As at 31.03.08
As at 31.03.07
As at 31.03.06
260.10 940.47 1200.57 1920.90 103.04 12.82 3237.33
273.30 1197.05 1470.35 1774.94 97.52 12.82 3355.63
255.58 1113.45 1369.03 1772.74 161.57 12.82 3334.16
265.48 1266.47 1531.95 1688.38 152.99 12.82 3386.14
3056.80 (1014.51) 2042.29 81.58 100.06 6.77
2942.99 (906.78) 2036.21 116.14 104.99 0.00
2817.21 (772.32) 2044.89 71.45 48.05 0.00
2192.24 (882.64) 1309.60 79.59 348.10 0.00
Current assets, Loan & Advance Inventories Sundry Debtors Cash & Bank Balance Other Current Assets Loan & Advance Total Less-Current Liability & Provision Liabilities Provisions Total Net Working Capital Miscellaneous Expenditure (to the extent not written off) TOTAL
581.47 350.84 26.83 54.90 578.47 1592.51 463.29 132.66 595.95 996.56 10.07 3237.33
575.34 261.77 16.32 73.26 544.45 1471.14 360.54 21.81 382.35 1088.80 9.50 3355.63
645.01 204.85 22.31 54.95 663.79 1590.91 408.99 12.15 421.14 1169.77 0.0 3334.16
479.26 368.28 9.59 38.68 1041.44 1937.25 243.31 45.09 288.40 1648.85 0.00 3386.14
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Particular
INCOME Sales & Operating Income Other Income Total EXPENSES Raw Materials Consumed Purchase of Finished Goods Employee Emoluments Others Interest & finance cost Depreciation Exceptional items (net) Decrease/(Increase) in Stocks Total Profit before tax for the year Less- Current tax Less-Deferred Tax Less Fringe benefit tax Add: MAT Credit Entitlement Profit For the year Less- Prior Period Income/(Expense) Profit before Extra ordinary items (net) Profit after Extra ordinary items Balance as per last years balance sheet Interim Dividend on Preference Shares Tax on Interim Dividend Proposed dividend on Equity Shares Tax proposed dividend Additional dividend on equity share Tax on additional dividend Provision for leave encashment Transferred to capital redemption reserves Transferred to debenture redemption reserve Balance Carried to Balance Sheet
2008-09 2344.99 51.91 2396.90 695.83 257.90 244.80 924.47 222.13 122.05 11.53 (34.86) 2443.86 (46.96) 0.00 0.00 1.86 0.00 (48.82) 0.95 (47.87) 0.00 (47.87) 434.92 (1.68) (0.29) 0.00 0.00 0.00 (80.10) (9.58) (13.20) 0.15 282.34
2007-08 2006-07 2005-06 2290.33 15.91 2306.24 611.26 305.54 230.39 861.04 131.40 136.64 9.31 (9.49) 2276.09 30.15 3.10 0.00 2.25 (3.10) 27.90 (0.54) 27.36 0.00 27.36 425.00 (2.48) (0.42) 0.00 0.00 0.00 0.00 (1.34) (13.20) 0.00 434.92 1847.99 1592.00 13.17 22.52 1861.16 1614.52 571.93 500.24 36.97 4.45 204.33 135.74 780.24 534.14 150.26 138.64 143.36 155.10 0.00 0.00 (53.64) 9.82 1833.45 1478.14 27.71 0.00 0.00 11.62 (11.61) 0.00 0.00 25.27 94.29 119.56 321.17 (3.14) (0.44) 0.00 0.00 0.00 0.00 0.00 (9.90) (2.25) 425.00 136.38 11.40 8.27 0.95 (11.40) 127.16 0.00 0.00 0.00 0.00 232.74 (3.80) (0.53) (20.94) (2.94) (1.40) (0.20) 0.00 (9.92) 1.00 321.17
2004-05 1654.91 4.99 1659.90 612.24 7.63 123.09 542.92 108.92 149.07 0.00 (12.76) 1530.60 129.30 1.95 0.00 0.00 0.00 127.35 0.00 0.00 0.00 0.00 127.77 (4.09) (0.53) (19.54) (2.74) 0.00 0.00 0.00 (3.48) 8.00 232.74
( Rs. in Crore ) (Actual working capital)
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WORKING CAPITAL
2008-09
2007-08
2006-07
2005-06
CURRENT ASSETS Raw Materials Work in process Finished goods Debtors Cash & Bank Balance TOTAL - (A) 93.17 202.19 255.39 350.84 26.83 928.42 139.77 146.58 243.23 261.77 16.32 807.67 264.27 140.12 198.64 204.85 22.31 830.19 257.12 112.56 71.54 368.28 9.59 819.1
CURRENT LIABILITIES Creditors Wages Overheads TOTAL - (B)
344.46 17.72 65.4 427.58
204.67 17.26 60.55 282.48
278.00 14.54 60.57 353.11
170.85 14.15 58.99 243.99
NET WORKING CAPITAL (A - B)
500.84
525.19
477.08
569.11
COMPUTATION OF WORKING CAPITAL

1. INVENTORY PERIOD:Avg. Stock of raw material LOVELY PROFESSIONAL UNIVERSITY 79
Inventory period
---------------------------------------- * 12 months Cost of raw material consumed
YEAR 200809
FORMULA Avg. Stock of raw material ----------------------------------------*1 2months Cost of raw material consumed Avg. Stock of raw material ----------------------------------------*1 2months Cost of raw material consumed Avg. Stock of raw material ----------------------------------------*1 2months Cost of raw material consumed Avg. Stock of raw material ----------------------------------------*1 2months Cost of raw material consumed
CALCULATION ANSWER 93.17 1.6 months ---------*12 months 695.83 139.77 ---------*12 months 611.26 264.27 ---------*12 months 571.93 257.12 ---------*12 months 500.25 2.76 months
200708
200607
5.55 months
200506
6.21 months
GRAPHICAL PRESENTATION OF INVENTORY PERIOD
2.
WIP HOLDING PERIOD:-
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Stock of WIP WIP holding period = ------------------------------------- * 12 months Cost goods manufacturing
YEAR
FORMULA Avg. Stock of WIP ---------------------------- * 12 months Cost goods manufacturing
CALCULATION
ANSWER
2008-09
202.19 ---------*12 months 1606.35
1.51month
Avg. Stock of WIP 2007-08 ---------------------------- * 12 months Cost goods manufacturing 146.58 ---------*12 months 1528.4 140.12 ---------*12 months 1387.48 112.56 ---------*12 months 1164.71 1.15month
Avg. Stock of WIP 2006-07 ---------------------------- * 12 months Cost goods manufacturing Avg. Stock of WIP 2005-06 ---------------------------- * 12 months Cost goods manufacturing 1.16month 1.21month
WORK IN PROGRESS GRAPHICAL TREND
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3.
FINISHED GOODS :Stock of finished goods Finished goods = ------------------------------------ * 12 months Cost of goods sold
YEAR 200809 200708 200607 200506
FORMULA
Avg. Stock of finished goods ------------------------------* 12 months Cost of goods sold Avg. Stock of finished goods ------------------------------* 12 months Cost of goods sold Avg. Stock of finished goods ------------------------------* 12 months Cost of goods sold Avg. Stock of finished goods ------------------------------* 12 months Cost of goods sold
CALCULATION ANSWER
255.39 ---------*12 months 1279.5 243.23 ---------*12 months 1483.59 198.64 ---------*12 months 1260.38 71.54 ---------*12 months 1196.71 2.40month
1.97month
1.89month
0.72month
FINISHED GOODS CONVERSION GRAPHICAL TREND
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4. DEBTOR COLLECTION PERIOD:Debtors ------------------------- * 12 months Credit sale Here no specification for cash or credit sales. So, all the sales are taken as credit sales. Debtors collection period = YEAR 2008-09 FORMULA Debtors -------------* 12 months Credit sale Debtors -------------* 12 months Credit sale Debtors -------------* 12 months Credit sale Debtors -------------* 12 months Credit sale CALCULATION 350.84 ---------*12 months 2295.19 261.77 ---------*12 months 2169.08 204.85 ---------*12 months 1811.62 368.28 ---------*12 months 1592.00 ANSWER 1.84month
2007-08
1.45month
2006-07
0.76month
2005-06
2.78months
DEBTOR COLLECTION PERIOD GRAPHICAL TREND
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5. Accounts payable period:Creditors Accounts payable period = ------------------------ * 12 months Credit Purchases YEAR 2008-09 FORMULA Creditors -----------------* 12 months 2007-08 Credit Purchases Creditors -----------------* 12 months 2006-07 Credit Purchases Creditors -----------------* 12 months Credit Purchases 2005-06 Creditors -----------------* 12 months Credit Purchases CALCULATION 344.46 ---------*12 months 1105.23 204.67 ---------*12 months 1000.51 278 ---------*12 months 873.59 170.85 ---------*12 months 650.86 3.16months 3.83months 2.46months ANSWER 3.74months
CREDITOR PAYABLE PERIOD GRAPHICAL TREND
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FORMULAS
1 2 3 4 5 6 7 Inventory holding cash WIP holding cash Finished goods hold. cash Debtors holding cash Accounts payable cash Wages Overheads ( Cost of raw material consumed/360)*RMCP (Cost of production/360)*WIPCP ( Cost of goods sold/360)*FGCP (Credit sale/360)*DCP ( Credit purchase/360)*CDP (Total wages/360)*WCP (Total overhead/360)*OCP
TANDON COMITEE NORMS
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Tandon committee, A study group set up by the reserve bank of India(RBI) in 1974,to examine the then prevailing system of WORKING CAPITAL financing by banks and to make suitable recommendations on the same. The contribution of the committee, headed by Prakash Tandon, that stands out relates to:
The framing of norms for INVENTORY and receivables for 15 major industries. Determining the amount of permissible bank finance.
The committee suggested norms, i.e. ceilings for inventory and receivables, which could be considered for bank finance. The 15 industries included cotton and synthetic textiles, paper, cement, pharmaceuticals and engineering. Thus, for instance, the norms proposed for the textile industry were: Time period of working capital
Raw Materials Work in process Finish goods Debtors Creditors Wages Overheads
= 100% = 1 month =1 month = 1 month = 1 month = 1 month = 1 month
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(Rs. in Crore) (As per tondon committe working capital) 200809 93.17 133.86 106.62 191.26 26.83 551.74 92.1 17.72 65.4 175.22 376.52 200708 139.77 127.36 123.6 180.75 16.32 587.8 83.37 17.26 60.55 161.18 426.62 200607 264.27 115.62 105.03 150.96 22.31 658.19 72.79 14.54 60.57 147.9 362.39
WORKING CAPITAL CURRENT ASSETS Raw Materials Work in process Finished goods Debtors Cash & Bank Balance TOTAL - (A) CURRENT LIABILITIES Creditors Wages Overheads TOTAL - (B) NET WORKING CAPITAL (A - B)
2005-06 257.12 97.05 99.72 132.6 9.59 596.08 54.24 14.15 58.99 127.38 468.7
WORKING CAPITAL GAP W.C. OF ARVIND W.C. AS PER TANDON COMITE M.P.B.F W.C GAP 500.84 376.52 282.39 218.45 525.19 426.62 477.08 362.39 569.11 468.7 351.525 217.585
319.965 271.793 205.225 205.288
MPBF=0.75(Current asset Current liabilities)
WORKING CAPITAL GAP
87
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SUMMARY OF OPERATING CYCLE CALCULATIONS
SUMMARY OF OPERATING CYCLE CALCULATIONS GROSS OPERATING CYCLE 1 INVENTORY CONVERSION PERIOD (i) RAW MATERIAL (ii) WORK IN PROGRESS (iii ) FINISHED GOODS CONVERSION PERIOD TOTAL (A) 2 DEBTOR CONVERSION PERIOD (B) GROSS OPERATING CYCLE (A+B) 3 CREDITORS DEFERAL PERIOD NET OPERATING CYCLE NO. OF OPERATING CYCLES PER YEAR 2009 48 45 72 166 55 221 112 108 3.32 2008 83 35 59 176 43 220 74 146 2.47 2007 166 36 57 260 23 282 115 167 2.15 2006 186 35 22 243 83 326 95 231 1.56
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ARVIND LTD (LAG PERIOD)

Particulars (Time-lag) 2008-09 Raw materials period Work-inprocess period Finished goods period Debtors collection period Accounts payable to creditors period Wages Overheads 1.61 months 1.51 months 2.40 months 1.84 months Time-lag of Tondon Committee 2005-06 6.21 Months 1.16 Months 0.72 Months 2.78 Months 1.5 month 1month 1month
Time-lag of Arvind Limited
2008-07 2.76 months 1.15 months 1.97 months 1.45 months
2006-07 5.55 months 1.21 months 1.89 months 0.76 months
1month
3.74 months
2.46 months
3.83 months
3.16 Months
1month
1month 1month
1month 1month
1month 1month
1month 1month
1month 1month
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INTERPRETATION
RAW MATERIAL:
Raw material consumption of Arvind varies according to market requirement but still it has maintained 100% consumption, which is in accordance of TANDON committee.
From the year 2005-06 to 2008-09 the time lag continuously decreased from 6.21 months to 1.61 months. So it was good try that they tried to maintain the raw material time-lag as per the Tondon committee norms.
WORK-IN-PROCESS:
As per the Tondon committee the time-lag for work-in-process is 1 month. Whereas the time-lag of Arvind Limited was varies each year. In the year 2005-06 they almost maintained the time-lag as per the Tondon committee norms i.e. 1 month. But there was slowly increased in the time-lag from 1.16month to 1.51 month from the year 2005-06 to 2008-09. FINISHED GOODS:
As per the Tondon committee for the textiles industry the time lag for finished goods is given i.e. 1 month. In the Arvind limited in year 2005-06 the time-lag was under the period of 1 month. In this year finished goods sold out 0.72 month duration.
From year 2006-07 to 2008-09 there was decrease in sales turnover. So the finished goods cant sell within 1 month duration. So the time duration of finished goods increased from 1.89 month to 2.40 month respectively in the year 2006-07 to 2008-09 year.
DEBTORS COLLECTION PERIOD:
As per the Tondon committee norms the duration for the debtors collection period 1
month for the textile industry but Arvind limited has high debtors collection period.
In the year 2005-06 the debtors collection period was very high that was 2.78
month, but as per the market condition and requirement of cash in the Arvind limited they tried to reduce the debtors collection period.
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But in year 2006-07 it almost reduced to 3 times as compared to 2005-06. After that it showed a steady growth which rose to 1.84 in 2008-09.
ACCOUNT PAYABLE TO CREDITORS:
As per the Tondon committee norms the period of payment to creditors is also 1 month. But the Arvind limited got very liberal credit policy for payment. So that there were no any creditors which collect the money within a month.
In the year2006-07 there was highest credit period that was 3.82 months among four years and lowest credit period was in the year 2007-08 which was 2.46 months only.
Credit period of Arvind is almost constant in these 4 consecutive year which is near about 3.months on average basis.
WAGES AND OVERHEAD:
And last the Wages and Overhead which has same lag period i.e. 1 month. So it does not create any difference.
WORKING CAPITAL POLICY

The basic objective of working capital management is that there should be an optimum investment in working capital. There should not be either excessive working capital or shortage of working capital. In order to decide the optimum investment working capital, there is a need to consider different policies of working capital. The different policies are discussed.
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(A) RATIO OF CURRENT TO SALES The current assets change as a result of changes in the sales. A firm has to decide about the proportion of current assets to be maintained in relation to sales. There can be aggressive, moderate or conservative current assets policies. AN AGGRESSIVE CURRENT assets policy is followed, a firms will maintain a very low level of current assets in relation to sales. A CONSERVATIVE POLICY implies carrying of a very high level of current assets in relation to sales. A MODERATE POLICY is a via media between the two extreme policies mentioned above and results into a moderate proportion of current assets to sales.
A MODERATE CURRENT assets policy tries to balances risk and profitability by keeping moderate level of current assets in relation to sales Conservative Moderate
Current Assets
Aggressive
Sales
(B) FINANCING OF CURRENT ASSETS:In conservative current asset financing policy, a firm relies more on long term financing such as shares, debentures, preference shares, long term debt and retained earnings. In this method, as the emphasis is on long term financing, the firm has less risk of facing problems of shortage of funds.
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An aggressive policy is said to be followed by a firm, when it relies heavily on short-term bank financing and other short-term sources. Even some part of fixed assets is financed by short-term funds. The policy exposes the firms to a higher degree of but reduces the average cost of financing.
PROBLEMS WITH EXCESSIVE WORKING CAPITAL

Its Results in unnecessary accumulation of inventories. Thus, chances of inventory mishandling, waste, theft and losses increase. Its an indication of defective credit policy and slack collection period. Consequently, higher incidence of bad debts results, which adversely affects profits. Excessive working capital makes management complacent which degenerates into managerial inefficiency. Tendencies of accumulating inventories tend to make speculative profit grows. This may tend to dividend policy liberal and difficult to cope with in future when the firms are unable to make speculative profits.
Inadequate Working Capital is bad and has the following Problems:

Its Stagnates growth. It becomes Difficult for the firms to undertaken profitable for non-availability of working capital funds. It becomes difficult to implement operating plans and achieve the firms profit target. Operating inefficiencies creep in when it becomes difficult even to meet day to-day commitments. Fixed assets are not efficiently utilized for the lack o f working capital funds. Thus then firms profitability would deteriorate. Paucity of working capital funds renders the firms unable to avail attractive credit opportunities etc. The firms, loses its reputation when it is not in a position to cover its shortterm obligations. As a result, the firm faces tight credit terms.
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S.W.O.T ANALYSIS
STRENGHT: A company from prestigious Lalbhai group One of the oldest played in Indian fabric market Unable to handle small orders Can supply both fabric as well as garment Higher cost of production due to Production monthly wise Provide quality with consistence capacity of 7million tons heavy investment WEAKNESS: Situated very far from city Low advertisement budget
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OPPORTUNITIES: Able to handle more franchisee of international brands Retails are going to be a major sector in India. Therefore demand for fabric is also increasing.
THREATS: Competition from various domestic players, especially from Raymonds and LNJ. Fluctuation in price of yarn. Regularly innovation in technology
Having potential to increase their capacity, so that they can satisfy more and more customer needs. By providing consistency in quality they can attract more customers. Change in government policy Existing players coming up with more variety and innovation esp. catering small order.
RESEARCH METHODOLOGY
My research project has a specified framework for collecting the data in an effective manner. Such framework is called Research Design. The research process which was followed by me consisted of following steps:
Defining the problem & Research Objectives:- The definition of problem

includes the study of financial system in ITC Ltd.
Developing The Research Plan:- It is very important to research anything we

must know about the its main sources where we get the main information regarding the research plan the development of research plan has following steps:-
Data Sources:- There are two types of data were taken into consideration i.e.
Secondary data and primary data. The secondary data has been used to make the analysis because we have no much sufficient time and resources to collect the primary data.
Secondary data:- secondary data is that data which is collected for other purpose.
This is indirect collection of data from sources containing past or recent past information like annual report, balance sheet, books, newspapers and magazines etc. LOVELY PROFESSIONAL UNIVERSITY 96
Collecting the information:-For this research methodology, we were collecting

information with the help annual reports, balance sheet and other companies publications.
Analyze the information :- In this research methodology the next step is to

extract the pertinent finding from the collected data. We tabulated this collected data and develop the means of analyzing the data. There are so many tools for financial analysis but we mainly concentrate on the RATIO analysis and supportive information taken from the other means i.e. comparative financial statement with its major components viz. common size statement, comparative financial statement.
FUTURE REQUIRMENT OF WORKING CAPITALARVIND LTD.
Profit of the Arvind Limited was increased during last three year, shows that their
requirements of working capital will also increasing in future.
As
the sales grow, the working capital needs also grow up. Actually it is very
difficult to find out an exact proportion of increase in current assets, as a result of increase in sales. Advance planning of working capital becomes essential because current assets will have to be employed even before growth in sales takes place. Ones sales start increasing, they must be sustained. For this Arvind Limited will have to expand its production facilities which will require more investments in fixed assets. This will in turn result in more requirements of turn results of current assets which will increase working capital needs.
The working capital needs of the Arvind Limited increase as it grows in terms of
sales or fixed assets. A growing Arvind Limited may need to invest funds in fixed assets in order to sustain its growth in production and sales. This will lead to increase investment in current assets which will result in increase in working capital needs.
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The operating efficiency of the Arvind Limited relates to the Optimum utilization of
resources at minimum cost. Arvind Limited will contribute to its working capital, if it is efficient in operating costs. The working capital is better utilized and cash cycle is reduced which reduces working capital needs.
The working capital requirement of a firm depends to a great extend on the credit
policy followed by a firm for its debtors. A liberal credit policy followed by a firm will result in huge funds blocked in debtors which will enhance the need for working capital. The need for working capital is also affected by the credit policy allowed by the Arvind Limiteds creditors. If the creditors are ready to supply material and goods on liberal credit, working capital requirement are substantially reduced. If purchases are mainly for cash, working capital needs go up. While planning the working capital due attention should be given toward the credit policies followed by the firm and its creditors.
RECOMMENDATION
Having done a detailed study of the financial performance and financial standing of Arvind Limited, under this project work I would like to make the following suggestion for the improvement in the financial management of the company, with special reference to its Working Capital Management.
Arvind Limited is facing increased competition in the market so it will have to adopt
more aggressive working capital management policy in order to increase its share and sales turnover.
It is observed that the credit period for Debtors is ranging for 30 days to 120 days. I would like to suggest that the maximum credit period should not exceed 90 days.
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Many debtors had not made the payment even after one year period. Due to this there is reduction in the collection from the debtors year to year.
Company has to maintain sales turnover for that purpose company has to maintain and increase their working capital. Gross profit has increasing but net profit has decreasing so that purpose effectively utilizes and maintain working capital.
CONCLUSION
Working capital is simply current assets minus current liabilities. It's the best way to judge how much a company has in liquid assets to build its business, fund its growth, and produce shareholder value. As Arvind is a cloth manufacturing company the procedure of goods to be ready for sale takes too much time. Thus, working capital is blocked in high amount. But with the comparison to other mills Arvind is leader of the Cloth manufacturing. And its Working Capital is blocked for lesser time then another mills as its inventory Cotton plays a major role and its available cheaply in the season. Also Arvind buys it in higher volumes, so it takes more time to stuff up and the complete readymade stock takes appx 1.25 month for wholesaling.
Ac t
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Arvind makes payment to his creditors within a month and collect from debtors takes appx 1.25 month. So, its overall short-term liquidity position is very good.
The mean percentage of current assets to total assets for the last four years is 40% which shows decrease in investment of current assets.
Overheads have increased as compare to the last two years thereby reducing the profit.
If a company has ample positive working capital, it's is in good shape, with plenty of cash on hand to pay for everything it might need to buy. But negative working capital means that the company's current liabilities exceed its current assets, removing its ability to spend as aggressively as a working-capital-positive peer. All other things being equal, a company with positive working capital will always outperform a company without it.
BIBLIOGRAPHY
1. Financial Management
- I. M. PANDEY
- PRASANNA CHANDRA
- KHAN & JAIN
4. Annual Report of Arvind Limited
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WEB-LINKS:
ls.com m .org www.wikipedia www.google.co www.arvindmil
OTHER BOOKS:
Financial Mnagement, Garima Publications
Agrawal
M.R,
Financial Management, Mc-Graw Hill Publications Annual reports of the company for the year 2007-08, 20
Pandey
I.M,
101

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LOVELY PROFESSIONAL UNIVERSITY

Submitted as partial fulfillment towards the degree of

Master of Business Administration

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THE ARVIND LIMITED

TO WHOMSOEVER IT MAY CONCERN

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LOVELY PROFESSIONAL UNIVERSITY

LOVELY PROFESSIONAL UNIVERSITY

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JATIN KHURANA MBA-II

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(F) (G) (H) (J) (K) (L)

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Employment in the Industrial Sector

Countrys total Export Earning

CONTRIBUTIONS OF TEXTILE INDUSTRY IN ECONOMY

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EVOLUTION AND EVALUATION OF TEXTILE INDUSTRY

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SEGMENTS IN TEXTILE INDUSTRY

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INDIAN TEXTILE INDUSTRY

GUJRAT TEXTILE INDUSTRY

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TEXTILE INDUSTRY KEY FACTS

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MAJOR PLAYERS IN THE TEXTILE INDUSTRY IN INDIA

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LNJ BHILWARA GROUP :(Diversified and vertically integrated denim

producer with spinning and weaving capacity)

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FUNCTIONING OF THE ORGANIZATION

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COUNTRYWISE EXPORT FOR DENIM (CONTRIBUTION IN %)

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DENIM MANUFACTURING PROCESS

BRIEF ABOUT OPERATIONS

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PROCESSES LOVELY PROFESSIONAL UNIVERSITY 29

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Rotor Spinning Blowing Carding Draw-Frame Yarn Final Packaging

DYEING AND SIZING

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The working cycle for Quality Assurance Department is as follows: -

Small Garmenting Division

Sample check cell