A STUDY ON WORKING CAPITAL MANAGEMENT AND

FINANCIAL GROWTH ANALYSIS OF PHILLIPS CARBON BLACK

LTD AND ITS PEER HIMADRI SPECIALITY CHEMICAL LTD

A report submitted in partial fulfilment of the requirements of

Master of Business Administration Degree

By

KUNTAL KUMAR MONDAL

18202094
(MBA 2018-2020)

KIIT, PATIA, Bhubaneswar 751024

INDUSTRY GUIDE: FACULTY GUIDE:

MR. CHANDAN VERMA Prof. CHANDRABHANU DAS

Designation: HEAD- ACCOUNTS & Designation: ASSISTANT PROFFESSOR

FINANCE AREA- FINANCE

Organisation: PHILLIPS CARBON BLACK Organisation: KIIT SCHOOL OF

LIMITED MANAGEMENT, BHUBANESWAR

Email id: chandan.verma@rp-sg.in Email id: chandrabhanudas@ksom.ac.in

Study of Working Capital Management and Financial Performance Analysis

 ACKNOWLEGEMENT
This project bears the imprint of many people who have assisted me in the successful completion
of this report. I gratefully acknowledge the contribution of all the people who took active part
and provided valuable support to me during the course of this project.

To begin with, I would like to offer my sincere thanks to “Phillips Carbon Black Limited” for
giving me an opportunity to do my summer internship with the esteemed organization.

With due reverence, I acknowledge the valuable support of “Mr.Chandan Verma, Head- Finance
& Accounts”, for giving me the opportunity to do my summer internship under his guidance.
Without his guidance, support and valuable suggestions during the research, the project would
not have been accomplished.

My heartfelt gratitude also goes to the entire “Accounts & Finance Department” for their co-
operation and willingness to answer all my queries, and provide valuable assistance.

I also sincerely thank “Mr. Chandrabhanu Das” my faculty mentor at KSOM, who provided
valuable suggestions, shared his rich corporate experience, and helped me script the exact
requisites.

Last, but not least, I would like to thank all Phillips Carbon Black Limited for sharing their
experience and giving their valuable time to me during the course of my project.

Name of student: KUNTAL KUMAR MONDAL

MBA (Batch) : 2018-2020
Roll No. : 18202094
KIIT SCHOOL OF MANAGEMENT, Bhubaneswar

Study of Working Capital Management and Financial Performance Analysis

 DECLARATION
I, Kuntal Kumar Mondal, a student of KIIT SCHOOL OF MANAGEMENT, hereby declare that
I have worked on a project titled “Working Capital Management and Financial growth
Analysis of Phillips Carbon Black Ltd. and its Peer Himadri Speciality Chemical Ltd.”
during my summer internship at “Phillips Carbon Black Limited”, in partial fulfilment of the
requirement for the Master of Business Administration degree.

I guarantee/underwrite my research work to be authentic and original to the best of my

knowledge in all respects of the process carried out during the project tenure.

My learning experience at Phillips Carbon Black Limited, under the guidance Mr.Chandan
Verma, Head- Finance & Accounts, and Mr.Chandrabhanu Das, Associate Professor Area Head
Finance, has been truly enriching.

Kuntal Kumar Mondal

Roll No. 18202094
Date: 17.07.2019

Study of Working Capital Management and Financial Performance Analysis

 LETTER OF TRANSMITTAL

Date:
Mr. Chandan Verma
Head – Accounts & Finance
Phillips Carbon Black Limited
DUNCAN House, 3rd Floor,
31, Netaji Subhas Road,
Kolkata-700001

Dear Sir,
Re: Summer Internship Project Report

Thank you very much for giving me this opportunity to associate with your company as an
Internee.
Attached is a copy of my summer internship project report “Working Capital Management
and Financial growth Analysis of Phillips Carbon Black Ltd. and its Peer Himadri
Speciality Chemical Ltd” which I am submitting in order to mark the completion of an eight-
week summer internship at you organization. The report summarizes the work performed on the
project and is being submitted in partial fulfilment of the requirements for award of Master of
Business Administration Degree.

I take this opportunity to mention that the overall experience with the organization was very
good, and helped me to know how work is carried out in real practice with the help of your
esteemed organization. I feel honoured that I got an opportunity to work with Phillips Carbon
Black Limited, a company of great repute.

I hope I did justice to the project and added some value to the organization.
Your valuable suggestions and comments would be highly appreciated.

Yours truly,
Kuntal Kumar Mondal
Roll No. 18202094
KIIT SCHOOL OF MANAGEMENT
Bhubaneswar.

Study of Working Capital Management and Financial Performance Analysis

 AUTHORIZATION

This is to certify that this report is submitted in partial fulfilment of the requirement of MBA
program of KIIT School of Management, Bhubaneswar.

This report document titled: “Working Capital Management and Financial Growth Analysis
of Phillips Carbon Black Ltd. and its Peer Himadri Speciality Chemical Ltd. “is a
submission of work done by Mr. Kuntal Kumar Mondal ( Roll no-18202094) as a part of
completion of the study at Phillips Carbon Black Limited. During his summer Internship
program under the guidance of Mr.Chandan Verma.

The project duration is of 8 weeks, starting from 9th May 2019 to 8th July 2019 and all the work
shown in the project is true to the best of the student’s knowledge.

The report has been verified and authenticated by-

Prof. Chandrabhanu Das. Mr. Chandan Verma.

Faculty Guide Head-Finance and Accounts.

KIIT School Of Management Phillips Carbon Black Limited.

Study of Working Capital Management and Financial Performance Analysis

 LIST OF CONTENT

Sl.No. CONTENTS Page No.

I Acknowledgement 2
II Declaration 3
III Letter of Transmittal 4
IV Letter of Authorization 5
V Table of Contents 6
VI. Executive Summary 7
1 Introduction 8-11
2 Literature Review 12
3 About the Industry: Carbon Black 13
4 Company Overview- Philips Carbon 14-15
5 SWOT analysis of PCBL 16
6 Company Overview of Peer - Himadri Chemicals 17-18
7 Comparative Analysis 19
8 Ratio Analysis and Interpretation 20
9 Data Analysis & interpretation 21-22
10 Graphical Analysis and Interpretation 23-27
Comparative analysis in between PCBL and Himadri chemicals
11 28-39
for last 13 years
12 Limitation 40
13 Office departmental work 41
14 Conclusion 42
15 Recommendation 43
16 Bibliography 44

Study of Working Capital Management and Financial Performance Analysis

 EXECUTIVE SUMMARY

Title of the study:

“Study of Working Capital Management and Financial growth Analysis of PCBL and its
peer Himadri Speciality Chemicals for the F.Y 2017-2018”

As a part of curriculum, every student studying MBA has to undertake a project on a particular
subject assigned to him/her. Accordingly I have been assigned the project work on the study of
working capital management in Phillips Carbon Black Limited & Himadri Speciality Chemicals
Limited.
Decisions relating to working capital (Current assets-Current liabilities) and short term financing
are known as working capital management. It involves the relationship between a firm’s short-
term assets and its short term liabilities.
The goal of working capital management is to ensure that the firm is able to continue its
operation and that it has sufficient cash flow to satisfy both maturing short term debt and
upcoming operational expenses.
Working capital is used in Phillips Carbon Black Limited & Himadri Speciality Chemicals
Limited, for the following purpose:-
Raw material, work in progress, finished goods, inventories, sundry debtors, and day to day cash
requirements.
Phillips Carbon Black Limited & Himadri Speciality Chemicals Limited, keep certain funds
which is automatically available to finance the current assets requirements.
Various information regarding “Working Capital Management” such as classification,
determinants, and sources have been discussed relating to Phillips Carbon Black Limited &
Himadri Speciality Chemicals.

Ratio Analysis has been carried out using Financial Information for the F.Y 2017-2018, Ratios
like Working capital Turnover Ratio, Quick Ratio, Current Ratio, Inventory Turnover Ratio,
Debtor Turnover Ratio, Creditors turnover ratio have also been analysed.
When PCBL compared with Himadri Speciality Chemicals, the working capital ratio of Himadri
Speciality Chemicals (1.34) is more than that of PCBL(0.90).
This shows working capital is managed effectively and all the other departments are working in
perfect co-ordination to ensure the progress of Himadri Speciality Chemicals, but I have given
some Suggestions & Conclusions on the basis of my Project Study.

Study of Working Capital Management and Financial Performance Analysis

 INTRODUCTION

 Working capital is the difference between a company’s current assets, such as cash,
accounts receivable (customers’ unpaid bills) and inventories of raw materials and finished
goods, and its current liabilities, such as accounts payable.
 Working capital is a measure of a company's liquidity, operational efficiency and its short-
term financial health.
 If a company has substantial working capital, then it should have the potential to invest and
grow.
 If a company's current assets do not exceed its current liabilities, then it may have trouble
growing or paying back creditors, or even go bankrupt.
 It is also known as net working capital (NWC).

CLASSIFICATION OF WORKING CAPITAL

WORKING CAPITAL

On The Basis Concepts On The Basis of Time

Gross Net Permanent / Temporary /

Fixed Working Fluctuating
Working Working
Capital Working Capital
Capital Capital

Initial Regular
Working Working
Capital
Capital

Seasonal Special Working

Working Capital
Capital
8

Study of Working Capital Management and Financial Performance Analysis

I. ON THE BASIS OF CONCEPTS
Gross Working Capital:
 Gross working capital is the amount of funds invested in various components of current
assets.
 Current assets are those assets which are easily / immediately converted into cash within a
short period of time say, an accounting year.
 Current assets include Cash in hand and cash at bank, Inventories, Bills receivables, Sundry
debtors, short term loans and advances.
 This concept has the following advantages:-
 Financial managers are profoundly concerned with the current assets.
 Gross working capital provides the correct amount of working capital at the right time.
 It enables a firm to realize the greatest return on its investment.
 It helps in the fixation of various areas of financial responsibility.
 It enables a firm to plan and control funds and to maximize the return on investment.
 Gross working capital has become a more acceptable concept in financial management.

Net Working Capital-

 It is the difference between current assets and current liabilities.
 Current liabilities are those that are expected to mature within an accounting year and
include creditors, bills payable and outstanding expenses.
 Working Capital Management is no doubt significant for all firms, but its significance is
enhanced in cases of small firms.
 A small firm has more investment in current assets than fixed assets and therefore current
assets should be efficiently managed.
 Working capital needs increase as the firm grows.
 As sales grow, the firm needs to invest more in debtors and inventories.
 The finance manager should be aware of such needs and finance them quickly.

II.ON THE BASIS OF TIME

Permanent / Fixed Working Capital:
 Permanent or fixed working capital is minimum amount which is required to ensure
effective utilization of fixed facilities and for maintaining the circulation of current
assets.
 Every firm has to maintain a minimum level of raw material, work- in-process, finished
goods and cash balance.
 Minimum level of current assets is called permanent or fixed working capital as this part
of working is permanently blocked in current assets.
 As the business grow the requirements of working capital also increases due to increase
in current assets.

Initial working capital

 At its inception and during the formative period of its operations a company must have
enough cash fund to meet its obligations.
 The need for initial working capital is for every company to consolidate its position.

Study of Working Capital Management and Financial Performance Analysis

Regular working capital
 Regular working capital refers to the minimum amount of liquid capital required to keep
up the circulation of the capital from the cash inventories to accounts receivable and
from account receivables to back again cash.
 It consists of adequate cash balance on hand and at bank, adequate stock of raw materials
and finished goods and amount of receivables.

1) Temporary / Fluctuating Working Capital

Temporary / Fluctuating working capital is the working capital needed to meet seasonal as
well as unforeseen requirements. It may be divided into two types.

a) Seasonal Working Capital

There are many lines of business where the volumes of operations are different and hence the
amount of working capital varies with the seasons.
The capital required to meet the seasonal needs of the enterprise is known as seasonal Working
capital.
b) Special Working Capital
The Capital required meeting any special operations such as experiments with new products or
new techniques of production and making interior advertising campaign etc, are also known as
special Working Capital.

Importance of Working Capital:

 Solvency of the business.
 Goodwill
 Easy Loans
 Cash Discounts
 Regular supply of raw materials.
 Regular payment of salaries, wages and other day to day commitments.
 Exploitation of favourable market conditions.
 Ability to face crisis.

Objectives of working capital:

 To maximize profit of the firm.

 To help in timely payment of bills.
 To maintain sufficient current assets.
 To ensure adequate liquidity of the firms.
 It protects the solvency of the firm.
 To protect the solvency of the firm.
 To increase the value of the firm.
 To minimize the risk of business.

10

Study of Working Capital Management and Financial Performance Analysis

Need for Working Capital:

 To purchase raw materials, spare parts and other component.

 To meet overhead expenses.
 To pay selling and distribution expenses.
 It is required to pay wages, salaries and other charges.

OPERATING CYCLE OF WORKING CAPITAL:

The working capital cycle reserves to the length of time between the firm paying cash for
materials etc., this working capital also known as operating cycle.

Working capital cycle or operating cycle indicates the length of time between companies paying
for materials entering into stock and receiving the cash from sales of finished goods.

The operating cycle (Working Capital) consists of the following events which are continues
throughout the life of business. CASH

DEBTORS RAW
MATERIALS

FINISHED STOCK WORK-IN-PROGRESS

 Conversion of cash into raw materials.

 Conversion of raw materials into work in progress.
 Conversion of work in progress into finished stock.
 Conversion of finished stock into accounts receivables(Debtors)through sale and
 Conversion of account receivables into cash.

11

Study of Working Capital Management and Financial Performance Analysis

 Literature Review
 Kaveri V. S. (1985) has based his writing on the RBI‟s studies on finances of large public
limited companies. This review of working capital finance refers to two points of time i.e.,
the accounting years ending in 1979 and 1983 and is based on the data as given in the
Reserve Bank of India on studies of these companies for the respective dates. He observes
that the Indian industry has by and large failed to change its pattern of working capital
financing in keeping with the norms suggested by the Chore Committee. While the position
of working capital management showed some investment between 1975-79 and 1979-83,
industries have not succeeded in widening the base of long-term funds to the desired extent.
The author concludes with the observation that despite giving sufficient time to the industries
to readjust the capital structure so as to shift from the first method to the second method,
progress achieved towards this end fell short of what was desired under the second method of
working capital finance
.
 Natarajan Sundar (1980) is of the opinion that working capital is important at both, the
national and the corporate level. Control on working capital at the national level is exercised
primarily through credit controls. The Tandon Study Group has provided a comprehensive
operational framework for the same. In operational terms, efficient working capital consists
of determining the optimum level of working capital, financing it imaginatively and
exercising control over it. He concludes that at the corporate level investment in working
capital is as important as investment in fixed assets. And especially for a company which is
not growing, survival will be possible only so long as it can match increase in operational
cost with improved operational efficiency, one of the most important aspects of which is
management of working capital.

 Bhatt V. V. (1972) widely touches upon a method of appraising working capital finance
applications of large manufacturing concerns. It states that similar methods need to be
devised for other sectors such as agriculture, trade etc. The author is of the view that banks
while providing short-term finance, concentrate their attention on adequacy of security and
repayment capacity. On being satisfied with these two criteria they do not generally carry out
any detail appraisal of the working of the concerns.

 Bhattacharyya Hrishikes (1987) tries to develop a comprehensive theory and tool of working
capital management from the systems point of view. According to this study, capital is often
used to refer to capital goods consisting of a great variety of things, namely, machines of
various kinds, plants, houses, tools, raw materials and goods-in-process. A finance manager
of a firm looks for these things on the assets side of the balance sheet. For capital he turns his
attention to the other side of the balance sheet and never commits a mistake. His purpose is to
balance the two sides in such a way that net worth of the firm increases without increasing
the riskiness of the business. This balancing is financing, i.e., financing the assets of the firm
by generating streams of liabilities continuously to match with the dynamism of the former.
The study is an improvement of the concept of Park and Gladson who were not able to
capture the entire techno-financial operating structure of a firm.

12

Study of Working Capital Management and Financial Performance Analysis

ABOUT THE INDUSTRY: CARBON BLACK
Global Carbon Market size was estimated at USD 17.22billion in 2018 and is projected to
expand at CAGR of 6.0% from 2019 to 2025.
Risking product usage in the production of plastics in anticipated driving the global market over
the forecast period.
Moreover, risking usage of these plastics in electrical and electronic components will boost the
product demand further.
Carbon Black is produced either by thermal decomposition or partial combustion method, which
includes oil or natural gas as a feedstock.
It is produced by four different processes, which are furnace back process, channel process,
acetylene black process and lampblack process.
The refurbishing trend has resulted in increased demand for high- performance coatings in
automotive as well as other industries, such as marine, aerospace.
The market dynamics are largely dependent on the usage of rubber, electronic discharge
compounds and inks along with several regulations formulated for manufacturing technologies
and raw materials used.
The market is also influenced by the regulatory laws by Major North American and European
Government bodies within the industry; transportation is poised to be the dominant segment over
the next seven years owing to increasing demand for tire and rubber.
The product helps to improve the strength and longevity of tires by providing better abrasion
resistance and tensile strength.
In addition, growing construction and manufacturing sectors utilizing industrial rubber and
equipment are anticipated to positively impact the product demand.
Product prices are majorly based on raw materials auxiliary materials, and utilities.
The crude oil price fluctuation has a major impact on the pricing of carbon black.
Volume demand for Carbon Black has a direct association with the end use industries, with the
automotive industry taking precedence, given that the largest quantity of this material is utilized
by tires and other Rubber Products largely used in automobiles.
Worldwide market for Carbon Black application segments explored in this study includes
Industrial Rubber Products, Paints and Coatings, Plastics, Printing Inks and Toners and Tires.

Figure shows Global Carbon

Black Market Share(%)

13

Study of Working Capital Management and Financial Performance Analysis

 Company Overview: Phillips Carbon Black Limited

 Revenue : 2,566.71cr
 PAT : 229.79cr
 EPS : Rs 13.33
 Total Shareholders Fund ` : 1372.35cr
 Total Non-Current Liabilities : 392.23cr
 Total Current Liabilities : 1094.78cr
 Total Non-Current Assets : 1870.36cr
 Total Current Assets : 989cr
 PCBL is a part of RP- Sanjiv Goenka Group, with a turnover of 2500 crores.
 PCBL is the world’s largest exporter of Carbon Black in India.
 Is produces around 50+ grades of Carbon Black ranging from rubber to specialty blacks.
 PCBL are reaching out to new customers and fostering stronger relationship with existing
customers across domestic and international businesses. PCBL’s strong after sales service
and technical support ensures a loyal base of tyre, non-tyre, rubber and non- rubber
customers around the world.
 Production Trend – 3,99,904 MT(2017-18)
 Sales Volume – 4,01,781 MT(2017-18)
 It has a team strength of 915.
 International Markets
1) Europe
2) Asia
3) USA
 PCBL’s business and financial performance has been significant improvements in the last
4 years after the company embarked on the journey of excellence across the organization.

PCBL Top customers

 MRF  MICHELIN
 NEXEN TYRE
 JK TYRE
 SHAKUN
 HUBRON
 CONTINRNTAL
 TVS TYRES
 BRIDGESTONE
 YOKOHAMA
 GOODYEAR
 CEAT

14

Study of Working Capital Management and Financial Performance Analysis

Management - Phillips Carbon Black

Name Designation
Sanjiv Goenka Chairman
O P Malhotra Director
Paras K Chowdhary Director
Shashwat Goenka Director
Preeti Goenka Non-Executive Director
Kaushik Roy Managing Director
K S B Sanyal Director
Pradip Roy Director
Kusum Dadoo Director

Vision

Inclusive Growth fired by free spirited Entrepreneurship.

Core Values

 Customer Happiness  Execution Excellence

Bring a smile on the face of your Put your heart and soul into your
customers. actions.
 Credibility  Speed
Instil trust and confidence with your Move ahead of time
actions.  Risk Taking
 Humaneness Dare to go beyond
Be caring and respectful to all.

Few Competitors of PCBL

 Aditya Birla Group

 BASF India
 Himadri Chemicals
 TATA Chemicals

15

Study of Working Capital Management and Financial Performance Analysis

SWOT Analysis of PCBL
STERNGTH

 PCBL’s after sales service and strong technical support ensures a fiercely loyal base of
customers.
 The company has redefined its business by establishing captive power plants at each
factory from the off gas or waste product from the carbon black manufacturing process.
 Industrial relation scenario at all the units continues to remain robust healthy and forward
looking.
 The Company continues to work closely with India Trees Foundation while strictly
adhering to Environment Health & Safety norms at all its manufacturing locations.
 The Company are pioneers in the Carbon Black segment in India.
 It has strong associations which include JK Tyres, Bridgestone, MRF, Ceat, Birla Tyres,
etc.

WEAKNESS

 The domestic Carbon Black Industry was impacted by a slowdown within the automobile
sector.
 The increasing dumping of Carbon Black into India by China and other countries also
affected the domestic demand.
 The company is affected by stringent regulations relating to environment which affects
operations and global reach.

OPPORTUNITIES

 Power continues to be an attractive segment for PCBL for improving profitability.

 The Company has chalked out plans to raise sales from specialty Carbon Black segment
as the demand is increasing.
 The strategic location of the four plants in different parts of India would facilitate
Company to optimize logistics costs within India and outside.

THREATS

 Withdrawal of Anti-Dumping Duty on Carbon Black.

 Inadequate infrastructure at ports causing detention of vessels and higher freight cost.
 Continuing high inflation which may dampen the purchasing power of customers.

16

Study of Working Capital Management and Financial Performance Analysis

 Peer Overview: Himadri Speciality Chemical Limited
Himadri Speciality Chemical Ltd. is an established brand with a strong proven track
record in the speciality chemicals business.
It is listed in BSE and NSE. The Company specializes in developing innovative products
with emphasis on R&D and focus on maximum utilization of resources.
Globally, HSCL is amongst the few completely integrated speciality carbon companies
leveraging on its deep knowledge of one of the most versatile substances - Carbon.
Over the years, with its core products and value-added by-products, the Company has
established itself as one of the world’s most extensive value chains in the Carbon
segment.
The Company is India’s leading and ONLY vertically-integrated specialty Carbon
Corporation, being the largest producer of coal tar pitch in India with ~70% market share
catering to requirements of Indian graphite and Aluminium industries.
Himadri also manufactures Carbon Black, Advanced Carbon Materials, Coal Tar Enamel,
Coal Tar Tape, SNF, Naphthalene, Refined naphthalene and Green Power.
The basic raw material for all these products comes from Himadri’s own distillation
Plant. This gives the Company a formidable advantage of producing customized products
of different specifications according to customers’ requirements and offering a superior
high quality product.
The Company aims to be among the top three producers of Carbon Chemicals globally.
Himadri will focus on adding innovative and specialized products to its portfolio and
expand into newer geographies.
 Revenue : 1978.94cr
 PAT : 242.57cr
 EPS : Rs 5.80
 Total Shareholders Fund : 1456.33cr
 Total Non Current Liabilities : 491.58cr
 Total Current Liabilities : 619.70cr
 Total Non Current Asset : 1737.95cr
 Total Current Asset : 829.65

Globally, HSCL is amongst the few completely integrated specialty carbon companies
leveraging on its deep knowledge of one of the most versatile substances carbon. Over the years
with its core products and value added by products, the company has established itself as one of
the world’s most extensive value chains in the carbon segment.

17

Study of Working Capital Management and Financial Performance Analysis

Vision :
Himadri harbous a vision to become a global leader in speciality carbon products by adopting
appropriate eco-friendly technologies and enhancing core capabilities through continuous
product improvement, technical innovation and customer satisfaction.

Value:

Integrity: HSCL shall be thoroughly professional in all their activities with absolute honesty and
will never compromise on its principles in any way.

Excellence: HSCL will always strive to achieve the best level of performance in whatever the
company do and continuously improve ourselves in order to reach that level.

Safety: The safety of HSCL’s stakeholder’s employees, suppliers, buyers and society is of
utmost important to this company and this company will never settle for any practice which puts
in any danger

Sustainability: the company will carry out their business activities to positively contribute to the
creation of a better tomorrow for its future generation.

Management - Himadri Speciality Chemical

Name Designation
Damodar Prasad Choudhary Chairman Emeritus
Shyam Sundar Choudhary Executive Director
Sakti Kumar Banerjee Independent Director
Santimoy Dey Independent Director
Santosh Kumar Agrawal Independent Director
Rita Bhattacharya Nominee Director
Bankey Lal Choudhary Managing Director
Vijay Kumar Choudhary Executive Director
Hardip Singh Mann Independent Director
Hanuman Mal Choraria Independent Director
Suryakant Balkrishna Mainak Independent Director
Sucharita Basu De Independent Director

18

Study of Working Capital Management and Financial Performance Analysis

Comparison of PCBL & Himadri Speciality Chemicals
Topics PCBL HIMADRI
Last share Price 146.50 104.90
Market 2523.29 4391.22
Capitalization
(in cr.)
Sales Turnover 3528.56 1971.17
(in cr.)
Net Profit (in 388.53 242.58
cr.)
Total Assets (in 2059.22 2051.74
cr.)

Ratio Analysis of PCBL & Himadri Speciality Chemical Ltd.

FY 17-18
PHILLIPS HIMADRI
PARAMETERS CARBON SPECIALITY
Black LTD CHEMICALS LTD
WORKING CAPITAL (in
(105.78) 209.95
Crore)
RETURN ON EQUITY (%) 16.74 16.65
RETURN OF ASSET (%) 8.03 9.44
DEBT TO EQUITY
0.5 0.41
RATIO
CASH EARING PER
84.23 6.55
SHARE (EPS)
RETURN ON CAPITAL
19.56 21.88
EMPLOYED (%)
CURRENT RATIO 0.9 1.34
QUICK RATIO 0.62 0.67
INVENTORY TURNOVER
8.22 4.75
RATIO
ASSET TURNOVER
89.07 76.77
RATIO

*SOURCE: Company Annual Report 2017-18

19

Study of Working Capital Management and Financial Performance Analysis

INTERPRETATION OF RATIO ANALYSIS
1. Working Capital:
 PCBL has a negative working capital which tells that creditors and investors that
operations of the business aren’t producing enough to support the business current
debts.
 On the other hand, Himadri shows appositive working capital.
 A positive calculation shows creditors and investors that the company is able to
generate enough from operations to pay off its current obligations with current asset.

2. Return on Equity:
 From the above we can see that PCBL’s Return on Equity i.e. 16.74 is more than its
peer Himadri which stands at 16.65.
 It reveals that the amount of profit generated by a company from the money invested
by the shareholders.

3. Return on Asset:
 The ROA measures how effectively a company can earn a return on its investment in
assets. ROA also tells how efficiently a company can convert the money used to
purchase assets into Net Income or Profit.
 In this case we can see Himadri’s ROA is 9.44, which is more than PCBL who’s
ROA stands at 8.03. This means Himadri’s capital intensity is more than PCBL.
 Usually ROA over 5% is generally considered good.

4. Debt to Equity Ratio:

 It is also known as financial leverage. It is a key financial ratio and is used as a
standard for judging a company’s financial standing.
 It measures a company’s ability to repay its obligations. When examining the health
of the company, it is critical to pay attention to the Debt to Equity Ratio.
 In this case PCBL D/E ratio i.e. 0.5 is higher than that of Himadri’s, who’s D/E ratio
stands at 0.41.
 Both the company have a low D/E ratio which indicates that a company is not taking
advantage of the increased profits that financial leverage may bring.
 Good D/E ratio is considered to be hovering somewhere around 1.5-2.

20

Study of Working Capital Management and Financial Performance Analysis

 5. Cash Earning Per Share:
 It measures the financial performance of a company by calculating cash flows on a
per share basis.
 It ignores all the non-cash items impacting the normal EPS to provide real earnings
generated by the business.
 In this case PCBL Cash EPS is 84.23 which is way higher than that of Himadri which
stands at 6.55.
 Therefore, we can say that higher the EPS, more money the company’s shares of
stock will be worth because investors are willing to pay more for higher profit.

6. Return on Capital Employed:

 From the above scenario it is clear that Himadri’s ROCE i.e. 21.88 is greater than that
of PCBL which stands at 19.56.
 This suggests that Himadri has a larger chunk of profit that can be invested back into
the company for the benefits of the shareholders.

7. Current Ratio:
 It shows us that Himadri is in a better position when compared with PCBL.
 As Himadri’s Current Ratio is 1.34 compared to 0.90 of PCBL.
 This suggests us that Himadri has higher capacity when paying their short term debts
earlier than that of PCBL.

8. Quick Ratio:
 Inventory is generally considered to be less liquid than other current assets.
 A rule of thumb is that a Quick Ratio greater than 1.0 means that a company is
sufficiently able to meet its short term obligations.
 In this case both the company’s Quick Ratio is less than 1.
 But Himadri’s Quick Ratio i.e. 0.67 is slightly higher than that of PCBL which stands
at 0.62.

9. Inventory Turnover Ratio:

 It is an efficient ratio that shows how effectively inventory is managed by comparing
cost of goods sold with average inventory for a period.
 This measures how many times average inventory is “turned” or sold during the
period. But in general a ratio between 4 and 6 usually means that the rate at which the
company restocks items is well balanced with the sales of the company.
21

Study of Working Capital Management and Financial Performance Analysis

  In this case PCBL Inventory Turnover Ratio i.e. 8.22 is much higher than that of
Himadri which stands at 4.75 signifying inventory is efficiently managed.

10. Asset Turnover Ratio:

 Asset Turnover Ratio is an efficiency ratio that measures a company’s ability to
generate sales from its assets.
 In other words, this ratio shows how efficiently a company can use its assets to
generate sales.
 In this case we can clearly see that PCBL Asset Turnover Ratio i.e. 89.07 is more
than that of Himadri which stands at 76.77
 PCBL is generating more sales than its peer Himadri.

22

Study of Working Capital Management and Financial Performance Analysis

Graphical Analysis & Interpretation

Last Price
1400
1200
1000
800
600
400
200
0 Last Price

Comparison of last Share Price of PCBL & its Peers: This shows that PCBL’s share is trading
at a very low when compared to its peers, but share value is higher than that of Himadri
Chemicals. Currently PCBL share price is showing a downward trend looking for a support
level.

Market Cap.(cr)
2,361.03
526.78

PCBL
Aditya Birla Group
5,834.69
BASF India
15,937.55
4,696.80 Himadri chemicals
TATA CHEMICALS

Comparison of Market Capitalization of PCBL & its Peers: It shows the value of the
company that is traded on the stock market, calculated by multiplying the total number of shares
by the present share price. PCBL’s Market Capitalization is less when compared to most of its
peers.

23

Study of Working Capital Management and Financial Performance Analysis

 Net Profit
PCBL

Aditya Birla
Group
388.53 BASF India
37.29
909.74 81.72 Himadri
307.3 chemicals
TATA
CHEMICALS

Comparison of Net Profit of PCBL & some of its Peers: It is also referred to as the bottom
line, or net earnings is a measure of the profitability of a venture after accounting for all costs
and taxes. PCBL’s Net Profit is comparatively higher than most of its peers, but is less than
TATA Chemicals.

Total Assets
2,059.22
1,375.98 PCBL
Aditya Birla Group
2,289.78 BASF India
Himadri chemicals
11,810.66 2,107.18 TATA CHEMICALS

Comparison of Total Assets of PCBL & its peers: Total Asset of PCBL is less than most of
its peers, but is higher than Aditya Birla Group.

24

Study of Working Capital Management and Financial Performance Analysis

 Sales turnover

8,000.00
6,000.00
4,000.00
2,000.00
0.00
Sales turnover
Sales turnover

Comparison of Sales Turnover of PCBL & its Peers: It is refer to the total amount of revenue
generated by a business during the calculation period. Calculation period is one year. PCBL’s
Sales Turnover is higher than most of its peers, but is less than BASF India.

The above graph shows Global Carbon Black Capacity in Kilo Ton
Per Annum(KTPA) of PCBL and few international players in the
global market.

25

Study of Working Capital Management and Financial Performance Analysis

 The above Table shows Plant Capacity of PCBL in MT.

The above graph shows comparision of PCBL with few of the

largest Domestic Player in Carbon Black Industry with reference
to Kilo Ton Per Annum(KTPA).

26

Study of Working Capital Management and Financial Performance Analysis

 The above graph shows Domestic Market Share Rises for PCBL and
other Companies.

The above graph shows Specialty Black and Operating Efficiences to Spur
EBITDA/Tonne of PCBL.

27

Study of Working Capital Management and Financial Performance Analysis

COMPRATIVE ANALYSIS IN BETWEEN PCBL AND HIMADRI CHEMICALS

FINANCIAL YEARS SALES(IN CRORE)

(FY) PCBL HIMADRI
2005-2006 817.25 206.98
2006-2007 1112.76 325.98
2007-2008 1018.25 363.26
2008-2009 1147.77 435.38
2009-2010 1178.05 505.93
2010-2011 1614.11 700.08
2011-2012 2096.97 1,123.36
2012-2013 2192.14 1,299.40
2013-2014 2297.97 1,362.90
2014-2015 2484.61 1,375.82
2015-2016 1912.67 1,151.01
2016-2017 2131.27 1,318.49
2017-2018 2600.31 1,971.17

3000

2500 2600.31
2484.61
2297.97
2000 2192.14 2131.27
2096.97
1912.67
1500 1614.11

1000 1112.76 1147.77 1178.05

1018.25
817.25
500

0
0

28

Study of Working Capital Management and Financial Performance Analysis

Interpretation:

Here, it is shown the comparative analysis in between the two company i.e. Phillips carbon
black (PCBL) and Himadri chemicals in terms of sales growth of last 13 years. Sales growth is
nothing but the amount by which the average sales volume of a company’s products or service
has grown, typically from year to year. Sales can increases in two ways method .one is if the
quantity of the sales became much higher and another way the price of their product of the
company has been increased. It is shown that from FY 2005-06 PCBL as it is increases their sales
growth with compare to its peer Himadri chemicals at a massive rate. FY 2017-18 it is shown
that PCBL reaches up to 2600.31 crore where as its peer Himadri reaches their sales up to
1971.17 crore. So it clearly interpret that PCBL is performing better throughout the last 13 years
in terms of sales with compare to its peer company Himadri chemicals .

PROFIT BEFORE TAX

FINANCIAL YEARS PBT (IN CRORE)

(FY) PCBL HIMADRI
2005-2006 18.7 87.25
2006-2007 44.55 98.65
2007-2008 112.78 105.97
2008-2009 97.3 93.77
2009-2010 130.58 145.25
2010-2011 164.35 143.4
2011-2012 103.42 81.53
2012-2013 40.04 17.06
2013-2014 87.91 -55.84
2014-2015 14.33 -26.36
2015-2016 57.04 -16.51
2016-2017 165.52 123.41
2017-2018 303.82 355.93

29

Study of Working Capital Management and Financial Performance Analysis

 400

350

300

250

200

150

100 Hi
m
50 ad
ri
0

-50

-100

Interpretation: Profit before tax (PBT) is a measure that looks at a company's profits before
the company has to pay corporate income tax. It deducts all expenses from revenue
including interest expenses and operating expenses except for income tax.An operating
expences is nothing but An operating expense is an expense a business incurs through its
normal businOften abbreviated as OPEX, operating expenses include rent, equipment,
inventory costs, marketing, payroll, insurance, and funds allocated for research and
development. Here it is shown that PCBL is increasing their PBT FY to FY.Upto FY 2010-11 it
reaches bullish at a certain growth except the FY 2008-09. After that it suddenly goes as like as
bearish and then from FY 2015-16 to the last financial year. In the financial year 2017-18 it
reaches at its peak in terms of profit before tax. Now for Himadri chemical company it is shown
that its PBT is growing from the FY 2005-06 to 2010-11, after that their PBT went down and
from FY 2013-14 it went negative PBT. The last PBT for the Himadri chemicals reaches to its
peak. And between PCBL and Himadri chemicals, Himadri’s PBT was greater than PCBL.

30

Study of Working Capital Management and Financial Performance Analysis

 EARNINGS PER SHARE

FINANCIAL YEAR EPS(earnings per share)

(FY) PCBL HIMADRI
2005-2006 -8.49 9.42
2006-2007 9.32 19.53
2007-2008 35.37 26.32
2008-2009 -22.95 14.66
2009-2010 43.43 27.83
2010-2011 35.43 2.97
2011-2012 25.82 1.64
2012-2013 -5.99 0.61
2013-2014 -25.12 -1.01
2014-2015 3.67 -0.37
2015-2016 4.91 -0.42
2016-2017 20.17 1.94
2017-2018 66.67 5.8

80

60

40

20

-20

-40

Interpretation: Earnings per share (EPS) is calculated as a company's profit divided by the
outstanding shares of its common stock. The resulting number serves as an indicator of a

31

Study of Working Capital Management and Financial Performance Analysis

company's profitability. It is common for a company to report EPS that is adjusted
for extraordinary items and potential share dilution. The higher a company's EPS, the more
profitable it is considered. The earnings per share value is calculated as the net income (also
known as profits or earnings) divided by the available shares. A more refined calculation adjusts
the numerator and denominator for shares that could be created through options, convertible
debt, or warrants. The numerator of the equation is also more relevant if it is adjusted for
continuing operations. The earnings per share metric is one of the most important variables in
determining a share's price. It is also a major component used to calculate the price-to-
earnings (P/E) valuation ratio, where the E in P/E refers to EPS. By dividing a company's share
price by its earnings per share, an investor can see the value of a stock in terms of how much
the market is willing to pay for each dollar of earnings.

EPS=(Total earnings/outstanding share .)

As its indicate the profitability of a company it is shown that for PCBL company it is fluctuating
upward and downward throughout the FY from 2005-06 to 2017-18.And sometimes in FY 2005-
06,2008-09,2013-14 it went towards negative EPS and in FY 2017-18 it reaches at its peak EPS
i.e. 66.67 which is very high with compare to its previous EPS. For himadri chemicals, they don’t
have so much negatrive EPS but EPS value is comparatively less than PCBL. The last FY i.e. 2017-
18 EPS value is very much less than PCBL. The value for Himadri chemicals value for that FY is5.8

CAPITAL EMPLOYED:
capital employed(
FINANCIAL YEAR crore)
(FY) PCBL HIMADRI
2005-2006 293.88 134.96
2006-2007 368.86 334.09
2007-2008 460.14 436
2008-2009 644.24 595.46
2009-2010 735.4 1053.63
2010-2011 797.6 1427.9
2011-2012 858.39 1526.12
2012-2013 841.8 1639.29
2013-2014 936.67 1581.48
2014-2015 869.76 1473.56
2015-2016 1395.5 1395.24
2016-2017 1521.42 1565.74
2017-2018 1764.58 1947.9

32

Study of Working Capital Management and Financial Performance Analysis

 2500

2000

1500

1000 capital employed( crore) PCBL

capital employed( crore) HIMADRI

500

Interpretation: Capital-employed provides a snapshot of how a company invests its money.

However, it can be problematic to define capital-employed because there are so many contexts
in which it can exist. However, most definitions generally refer to the capital investment
necessary for a business to function. The simplest presentation of capital employed is total
assets minus current liabilities. Sometimes, it is equal to all current equity plus interest-
generating loans (non-current liabilities).. To define it properly, capital employed can be
expressed as the total amount of capital that has been utilized for acquisition of profits. It also
refers to the value of all assets (fixed as well as working capital) employed in a business. It is
shown that the growth of PCBL is bullish in terms of capital employed but suddenly in one FY
i.e. 2015-16 the capital employed was down little bit with compare to its past FY.But the
“Himadri chemical” company’s capital employed was greater than PCBL of last 13 years. The FY
i.e.2017-18 the capital employed for PCBL was reached at its pick and also same for “Himadri
chemicals “ But for both the companies comparative analysis in terms Capital employed ,here
“Himadri chemicals “ Capital employed was much greater than the company Phillips carbon
limited.

33

Study of Working Capital Management and Financial Performance Analysis

 INVESTMENT IN FIXED ASSET:
FINANCIAL YEARS INVT IN FIXED ASSET( CRORE)
(FY) PCBL HIMADRI
2005-2006 282.2 134.38
2006-2007 281.38 194.94
2007-2008 375.41 302.51
2008-2009 610.75 520.55
2009-2010 685.47 619.61
2010-2011 757.56 848.2
2011-2012 812.36 1,068.12
2012-2013 911.82 1,165.03
2013-2014 924.97 1,195.41
2014-2015 893.92 1,157.82
2015-2016 1489.18 1,128.17
2016-2017 1461.29 1,112.34
2017-2018 1466.04 1,116.85

1600
1400
1200
1000
800
600
400
200
0

Interpretation: An asset that is not consumed or sold during the normal course of business,
such as land, buildings, equipment, machinery, vehicles, leasehold improvements, and other
such items.
Fixed assets enable their owner to carry on its operations. In accounting, fixed does not
34

Study of Working Capital Management and Financial Performance Analysis

necessarily mean immovable; any asset expected to last, or be in use for, more than one year is
considered a fixed asset. On a balance sheet, these assets are shown at their book value
(purchase price less depreciation).In this financial parameter it is seen that the growth of PCBL
in terms fixed asset investment is really remarkable. From FY 2005 -06 to 2013-14 the
increment of fixed asset is very delightful after that for financial year 2014-15 the fixed asset
value is little bit less in compare to its previous years. After that from FY 2015-16 to FY 2017-18
fixed asset value reached its peak throughout the last 13 years fixed asset value. Now coming to
Himadri chemicals company their fixed asset value is also very remarkable .From FY 2011-12 to
FY 2017-18 the value of fixed asset is reached at its peak and keep continuing the fixed asset
value constant at least last 7 Financial years .

WORKING CAPITAL:

FINANCIAL YEARS WORKING CAPITAL( IN CRORE)

(FY) PCBL HIMADRI
2005-2006 -40.19 -2.17
2006-2007 53.52 133.31
2007-2008 44.84 129.11
2008-2009 -40.59 71.17
2009-2010 -42.06 232.6
2010-2011 -110.87 488.93
2011-2012 -149.94 288.19
2012-2013 -256.09 322.36
2013-2014 -150.95 198.31
2014-2015 -179.76 109.5
2015-2016 -267.26 36.46
2016-2017 -182.88 143.98
2017-2018 -105.78 209.95

35

Study of Working Capital Management and Financial Performance Analysis

 600

500

400

300

200

100

-100

-200

-300

-400

Interpretation: The required value of funds that a company is required to keep on hand in
order to be able to pay its debt obligations and other business related expenses. Several factors
go into the determination of this requirement. Working capital means the difference between
current asset and current liabilities .so it means if the working capital value will be positive then
it clearly signifies that current asset value is greater than current liabilities .From the graph it
clearly signifies that for the PCBL company their current asset is less than its current liabilities.
So that the value becomes negative and from graphical point of view it goes towards
downward. Another side for the company “Himadri chemicals” their current asset is grater than
with compare to current liabilities .so that the value of working capital comes positive .So it
clearly interpret that Himadri chemicals performance is better in terms of working capital with
respect to PCBL which is its peer company .for himadri chemicals from FY 2006-07 to 2017-18
its working capital value is positive and it is above the curve and for PCBL from FY 2008 -09 to
2017-18 the working capital value is negative and it is below the curve .

36

Study of Working Capital Management and Financial Performance Analysis

 BORROWINGS :

FINANCIAL YEARS BORROWINGS(CRORE)

(FY) PCBL HIMADRI
2005-2006 356.96 128.43
2006-2007 249.85 180.43
2007-2008 290.16 213.19
2008-2009 425.1 344.66
2009-2010 555.03 414.25
2010-2011 443.93 811.78
2011-2012 654.8 1044.9
2012-2013 818.37 1193.58
2013-2014 1011.39 1148.44
2014-2015 1103.3 1031.27
2015-2016 909.72 758.06
2016-2017 738.3 725.72
2017-2018 686.88 595.42

1400

1200

1000

800

600

400

200

Interpretation: The total charge for taking on a debt obligation that can involve interest
payments and other financing fees. The borrowing cost for a business tends to go up when
prevailing market interest rates are rising during times of economic expansion and increased
inflation, even if its credit standing remains excellent.Here it is clearly indicate that the

37

Study of Working Capital Management and Financial Performance Analysis

borrowing is both the combination of short term as well as long term borrowings .It means
Receiving something of value in exchange for an obligation to pay back something of usually
greater value at a particular time in the future.It is known that the company which have less
borrowings its performance is well as its don’t have too much liabilities in market .Here for the
company “PCBL” the borrowings are bullish from the FY 2010-11 to 2014-15 and after that from
FY 2015-16 to 2017-18 it went downward. It is happen similarly for the company “Himadri
Chemicals” but when it comes to comparison case in between both the company it is clearly
seen that PCBL’s borrowing is less .so that the company’s growth in terms of borrowing case is
better for PCBL .

PRICE PER EARNING RATIO:

FINANCIAL YEAR P/E RATIO

(FY) PCBL HIMADRI
2005-2006 -2.89 3.19
2006-2007 5.85 3.51
2007-2008 0.22 0.47
2008-2009 -1.33 2.98
2009-2010 0.78 1.78
2010-2011 0.49 16.08
2011-2012 0.7 14.85
2012-2013 -1.94 30.33
2013-2014 -0.93 -23.61
2014-2015 6.94 -35.14
2015-2016 9.09 -81.55
2016-2017 9.67 79.25
2017-2018 2.99 22.6

38

Study of Working Capital Management and Financial Performance Analysis

 100

80

60

40

20
P/E RATIO PCBL
0
P/E RATIO HIMADRI
-20

-40

-60

-80

-100

Interpretation: The price-to-earnings ratio (P/E ratio) is the ratio for valuing a company
that measures its current share price relative to its per-share earnings (EPS). The price-to-
earnings ratio is also sometimes known as the price multiple or the earnings multiple. P/E ratios
are used by investors and analysts to determine the relative value of a company's shares in an
apples-to-apples comparison. It can also be used to compare a company against its own
historical record or to compare aggregate markets against one another or over time. Analysis
and investors review a company's P/E ratio when they determine if the share price accurately
represents the projected earnings per share. The formula and calculation used for this process
follow.

P/E Ratio=Earnings per share Market value per share.

The P/E ratio helps investors determine the market value of a stock as compared to
the company's earnings. In short, the P/E ratio shows what the market is willing to pay today
for a stock based on its past or future earnings. A high P/E could mean that a stock's price is
high relative to earnings and possibly overvalued. Conversely, a low P/E might indicate that the
current stock price is low relative to earnings. Face value, also referred to as par
value or nominal value, is the value shown on the face of a security certificate,
including currency. The concept most commonly applies to stocks and bonds, so it is particularly
important to bond and preferred stock investors. It is shown that the face value of the PCBL
company is currently RS 2 and The face value of “Himadri chemicals “is RS 1 . price per earnings
ratio of PCBL company is always positive where as Himadri chemicals company’s price per
earning ration went to negative in different financial year like FY 2014-15,2015-16, 2016-17 .
It’s went too negatively down in FY 2015-16 where as in FY 2016-17 its P/E ratio went too
positiuvelty high and it reached upto 79.25.
39

Study of Working Capital Management and Financial Performance Analysis

Limitations:
 The duration of the study was short.
 Limited interaction with the concerned heads due to their busy schedule.
 The findings of the study are based on the information retrieved by the selected unit.

40

Study of Working Capital Management and Financial Performance Analysis

Office departmental work :
Apart from my project I have done some company’s official work which was given to me Mr.
Ahindra Bhowmik, Sr. Executive, Phillips Carbon Black Limited (Finance and Accounts
Department).

1. Reimbursement amount verification.

2. Checking of Bill of Lading charge. (Negotiated office rate charge).
3. Checking of Tax invoice of shipping consignment/ Bill of supply.

1. Reimbursement amount verification: Reimbursement is an act of compensating someone

for an expense. Often, a person is reimbursed for out-of-pocket expenses when he/ she incurs
those expenses through employment or on account of carrying out the duties for the organization.

 Reimbursement claims: Reimbursement components can be configured and structured

based on company policies, Admins can add Reimbursement Claims from the ‘Admin
Login’ on behalf of the employee, and Employees can add Reimbursement Claims.

2. Checking of Bill of Lading charge. (Negotiated office rate charge): A document issued
by a carrier to the shipper as a contract of carriage of goods. Contract between the owners of
the goods. The negotiable BOL can be bought, sold, or traded while the goods are in transit.
The customer will usually need an original as proof of ownership to take possession of the
goods.

These all are very much effected for working capital management as well. As the above work is
directly or indirectly related to current Assert so the firm is able to continue its operation and that
it has sufficient cash flow to satisfy both maturing short term and upcoming operational
expenses.

41

Study of Working Capital Management and Financial Performance Analysis

Conclusion
The study on working capital management conducted on Phillips Carbon Black Ltd. and
Himadri Speciality Chemicals Ltd. to analyze the financial position of both the companies. The
company’s financial position is analyzed by using the tool of annual report of F.Y 2017-18.

The financial status of Phillips Carbon Black Ltd. and Himadri Speciality Chemicals Ltd. is
good.

In the last year the inventory turnover of PCBL is more than that of Himadri, this is good sign for
PCBL.

The company’s liquidity position is very good With regard to the investments in current assets
there are adequate funds invested in it. Care should be taken by the company not to make further
investments in current assets, as it would block the funds, which could otherwise be effectively
utilized for some productive purpose. On the whole, PCBL is moving forward with excellent
management when compared with its peer Himadri Speciality Chemicals Ltd.

42

Study of Working Capital Management and Financial Performance Analysis

RECOMMENDATIONS:
Phillips Carbon Black Limited (PCBL) is the largest producer of carbon black in India ( 37%
market share) and the seventh largest worldwide. The company is expected to be major
beneficiary of tyre investments in India which coupled with global demand supply tightness
is likely to keep utilization levels high for rubber carbon black. Margin per ton is likely to
also increase driven by mix shift towards specialty black. Higher coal tar prices and
antidumping on Chinese imports of rubber carbon black would benefit local producers using
crude based CBFS as feedstock.

Driven by encouraging market scenario and shift of mix towards specialty black, it is
estimated strong EBITDA growth of – 24% CAGR during FY18- FY20 period. While cost
efficiency efforts coupled with operating and financial leverage, will help company to
achieve impressive PAT growth of – 27% CAGR during the same period. EPS for
FY18/FY19/FY20 are INR 58.4/77.5/93.6, respectively.

Pros
 PCBL, the largest producer of carbon black in India and seventh largest carbon black
producer in the world, is likely to benefit from the global supply tightness in carbon
black and high tyre investments in the Asia Pacific region.
 Sustained high Coal tar prices is likely to make crude based CBFS more competitive
leading to less Chinese competition in terms of volumes and pricing.
 PCBL expects to increase its high-end specialty black capacity by 32,000 MTPA
which is a niche high value sub-segment of the carbon black industry and likely to
increase PCBL’s EBITDA per ton by INR2,500/ton between FY18-20.
 Greenfield capex of 1,20,000 tons is likely to drive growth post FY20.

Cons

 Inability to realize incremental sales volumes in the specialty black market.

 Any sharp movement in crude oil prices that bring inventory losses.
 Relaxation of environmental laws in China.
 Sharp fall in coal tar prices that could hit realizations of carbon black.
 Inability to hedge forex and inventory risk.

43

Study of Working Capital Management and Financial Performance Analysis

 Bibliography

 Annual Report for F.Y 2017-18 of PCBL & Himadri Speciality Chemical Ltd
 Financial blogs
 Edelweiss Investment Research, Notch Consulting

44

Study of Working Capital Management and Financial Performance Analysis