Summer Internship Project

On
‘Working Capital Management’

SUBMITTED BY:-
Aman Kumar Singh
MBA 2nd Semester

Session:- 2018-20

SUBMITTED TO:-
Institute of Management
Pt. Ravishankar Shukla University, Raipur (C.G.)

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 Aditya Birla
Grasim Industries Ltd.

‘Working Capital Management’

SUBMITTED To : SUBMITTED To :

Mr. Prakash Chandra Verma AGM (F&A) Mr. Vijay Dandiwala

Grasim Industries Ltd Grasim Industries Ltd
Rehla, Palamau, Jharkhand Rehla, Palamau

SUBMITTED By:
Aman Kumar Singh
MBA 2nd Semester

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 STUDENT CERTIFICATE
This is to certify that this report is prepared based on summer
internship project undertaken by Aman Kumar Singh in ADITYA
BIRLA CHEMICALS (INDIA) LIMITED.
Under the guidance of Mr. Prakash Chandra Verma AGM
(Finance & Accounts), in partial fulfillment of the requirement
for award of Master of Business Administration (MBA) from
Institute of Management (PRSU) Raipur.

During the tenure of his training he was found sincere,

hardworking and eager to learn.

I wish him all the success for his future studies.

Mr. Aman Kumar Singh Mr. Prakash Chandra Mr. Vijay Dandiwala
Verma
Student Trainee HR Head
DGM (F&A)

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 ACKNOWLEDGEMENT

I express my gratitude towards Mr. Prakash Chandra Verma

AGM(F&A) and Mr. Rajesh Rathi (DM) my mentor and
coordinator in Grasim Industries Ltd. Rehla for providing their
guidance and supervision as well as for providing necessary
information regarding the project.
It’s my radiant sentiment to express gratitude to Mr. Vijay
Dandiwala (HRD) for giving me opportunity to get intern in the
company which was extremely valuable for my study both
theoretically and practically.

I am highly obliged to staff members of Grasim Industries Ltd.

for valuable information and knowledge provided by them
regarding the topic and faculty members of my college Institute
of Management, Faculty of Management Studies, (PRSU), Raipur
(CG).

Aman Kumar Singh

MBA 2nd Semester

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 CONTENTS

Chapter
no. Description S.no.
Chapter 1 About the company 6-19
Overview
Milestones
Vision, mission and
values
Executive Leadership
Team
Aditya Birla chemical
(India) limited
Chapter 2 Company product 20-26
Chapter 3 Working Capital Management 27-33
Chapter 4 Goods and Service Tax 34-39
Chapter 5 Financial Statement Analysis 40-47
Chapter 6 Findings 48
Chapter 7 Recommendation 49
Chapter 8 Conclusion 50
Chapter 9 Bibliography 51

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 OVERVIEW :-
A us$ 44.3 billion (RS 4,400 crore ) corporation ,the Aditya Birla is in the
league of fortune 500. it is in the anchored by an extraordinary force of
over 120,000 employees belonging to the 42 nationalities. The group
has been ranked number 1 in Asia pacific for 2011.`Top companies for
leaders’ conducted by Aon Hewitt ,fortune magazine and RBL (a
strategic HR and leadership advisory form).the group has topped the
Nielsen’s corporate image monitor (2014-15)and emerged as the
number one corporate . The “Best in class fourth consecutive year.
Over 50 percent of the group’s revenues flow its overseas operations. It
operates in 36 countries.

ADITYA BIRLA -GLOBAL SCENARIO

 A metals, power house, among the world ‘s most cost efficient

aluminium and copper producers Hindalco Novelis is the largest
aluminium rolling company. It is one of the three biggest producer of
the primary aluminium in Asia with largest single location copper
smelter.
 No.1 in Viscose staple fibre.
 No.1 in carbon black.
 The fourth largest producer of acrylic fibre.
 Among the top 10 cement producers globally.
 Among the best energy efficient fertiliser plants.
 The largest Indian MNC with manufacturing operations in the USA,
where in 95 percent of workforce companies of Americans.

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ADITYA BIRLA –INDIAN SCENARIO

 A top fashion (branded apparela) and life style player.

 The second largest player in Viscose filament yarn.
 The largest producer in the chlor-alkali sectors.
 Among the top three mobile telephony companies.
 A leading player in life insurance and asset management
 Among the top two super market chains in retails business.

MILESTONES
The Aditya Birla Group, India’s first multinational corporation. Traces its
origins back to the ting village of pilani in the Rajasthan desert. Where
Seth Shiv Narayan Birla started cotton trading operations in 1957.Today,
the group’s footprint extends to 20 countries and its revenues are US $
24 billion. We retrace the highlights of this remarkable journey, starting
from begining.

1857
The foundation of Birla Group of companies is laid by Seth Shiv Narayan
Birla, cotton trading operations commence at Pilani Rajasthan.

1919
Ghanshayamdas Birla gradson of Shiv Narayan Birla, set up the first Birla
jute mill, marking his entry into the manufacturing sectors. Rapid
business expansion follows.

1947
Grasim is incorporated. It commences operation with a small rayon
weaving unit in Gwalior, MP.

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1958
Hindalco is incorporated.

1965
Aditya Birla, grandson of the legendary Ghanshayamdas Birla,
starts the eastern spinning mills and industries.

1966
The Indian Rayon Corporation Ltd. is acquired.

1969
Aditya Birla sets up Indo Thaisynthetics Company Ltd. The group’s first
overseas company.

1986
The Birla growth fund is set up to finance industrial equipment plant and
machinery and consumer durables, as well as for stock market
operation.

1990
Mr. Kumar Mangalam Birla gets actively involved in the group’s
operation.

1998
 The group form 50:50 joint venture company with Tembec INC of
Canada, called A.V Cell INC, to supply pulp for the Group’s VSF
operation.
 Grasim acquries Dharani Cement and Shree Digvijay Cement to
consolidate the group’s leadership position in cement.
 The cement business of Indian Rayon and Grasim are consolidated
into a single division of Grasim. The biggest restructuring even by
any corporate entity in India.
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  The Group Forays into copper with commissioning of Indo Gulf’s
Copper Smelter –the largest of its kind in india.
 The origic chemicals begins commercial opertions of chloro alkali
and epichlorohydrin.
1991
A joint venture with financial services major Sun life of Canada is linked,
as part of the overall restructuring of the group’s financial services
business.

2001
 Grasim acquires 2.50 crore shares representing just over 10 per
cent of the equity in L&T from Reliance Industrial Limited.
 Birla consultancy & software services spun off, becomes a separate
entity called Birla Technologies Ltd.
 Indian Rayon acquires a stake in PSI data system in one of the
largest cash transactions in the Indian Technology sector.

2002
 The Grasim board approves an open offer for purchase of up to 20
percent of the equity of L & T in accordance with the provisions
and guidelines issued by the securities and exchange board of
India regulation 1997.
 Grasim increases stake in L&T to 14.15 percent (351.84lakh share)
 Land Mark Corporate restructuring of Hindalco and Indo Gulf. The
fertilizer business of Indo Gulf to be demerged into separate.

2003
Mr. Kumar Mangalam Birla, chairman of the group, is selected as
business India’s businessman of the year 2003.

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2006
Grasim industries limited, India; Thai Rayon Public Company Ltd,
Thailand PT Indo bharat rayon. Indonesia forms a venture with Hubei
Jing Wei Chemical Fibre Company, China, for VSF.

2007
In may 2007, Novelis became a Hindalco subsidary with the completion
of the acquisition process. The transaction markes Hindalco the world’s
largest aluminium rolling company and one of the biggest producer of
primary aluminium is Asia as well as being India’s leading copper
producer.

2010
Ultratech Cement acquires a majority stake and management control in
Dubai based Star Cement Company, LLC (Star Cement). Star Cement
owns Cement plant in UAE Bahrin and Bangladesh with a total capacity
of three million tonnes annually this acquisition gives the Aditya Birla
strong foot print in Middle east.

2011
ABCIL acquired Kanoria Chemicals based on Renukoot in may 2011.

2012
 Aditya Birla Group (company name) makes a financial investment
of 27.5 per cent in living Media India Limited (India Today Group)
through a private investment company in May.
 Aditya Birla Group acquires Terrace Bay Pulp Mill in north western
ontorio in July 2012.
 Aditya Birla Nuvo Limited (ABNL), largest manufacturer of linen
fabric in India, acquires future group’s Pantaloons retail (India)
limited (PRIL).

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2013
 Ultratech Cement acquires the Gujarat Cement unit of Jaypee
Cement Corporation.
 Aditya Birla Chemicals (India) limited acquires the chlor –alkali and
phosphoric acid divisions of Solaries Chemtech Industries through
ABCIL for Rs. 153 crore in May.

2015
 Aditya Birla Nuvo Limited consolidates its Branded Apparels
Businesses under listed subsidiary-Pantaloons Fashion & Retails
(PFRL). The Board approves PFRL to be renamed as `Aditya Birla
Fashion & Retail Limited (“ABFRL”).
 Mr. Kumar Mangalam Birla is bestowed with Global Leadership
Award of the US India Business Council (USIBC), at the 39th
Anniversary Leadership Summit Washington DC.
 Aditya Birla merge with Grasim.

2016
Mrs. Rajshree Birla honored with the lifetime achievement award
2015-2016 by the ladies wings of Indian merchants’ chamber.

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 Visions, Mission and Values:

Visions:
 To be leading customer focused global chemical business that
delivers best-in-class products and specially solutions using safe,
sustainable and innovative process.
 To be premium global conglomerate, with a clear focus on each of
the businesses.

Mission:
 To provide sustainable growth, combined operational excellence
and aggressive strategic marketing to create value for customer
and other stakeholders.
 To deliver superior value to our customers, shareholders,
employees and society at large.

Values:
 Integrity: Acting and taking decision in a manner that is fair and
honest.
 Commitment: On the foundation of integrity, doing all that is
needed to deliver value to all stakeholders.
 Passion: An energetic, intuitive zeal that arises from emotional
engagement with the organisation that makes work joyful and
inspires each one to give his or her best.
 Seamlessness: Thinking and working together across functional
groups, hierarchies, businesses and geographies.
 Speed: Responding to internal and external customers with a
sense of urgency and continuously striving with a sense of
urgency.

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Executive Leadership Team:

1. Broad of Directors
Mr. Kumar Mangalam Birla – Chairman
Mrs. Rajashree Birla
Mr. ML Apte
Mr. BV Bhargava
Mr. Cyril Shroff
Dr Thomas M Connelly Jr.
Mr Usha Sangwan (LIC nominee)
Mr Shailendra K Jain
Mr OP Rungta
Mr Arun Kannan Thigarajan
Mr Dilip Gaur - (Managing Director)
Mr Sushil Agarwal – (Whole-Time Director)

2. Managing Director:
Mr Dilip Gaur

3. Chief Financial Officer:

Mr Sushil Agarwal

4. Business Heads:
Mr Dilip Gaur - Fibre & Pulp
Mr KK Maheshwari - Cement
Mr Rahul Kohli – Fertiliser
Mr Rohit Pathak, Insulator
Mr ER Raj Narayanan, (Group Executive President & SBU Head-
Chlor Alkali and Viscose Filament Yarn)
Mr Thomas Varghese, Textiles
Mr Ajay Srinivasan, Financial Services
Mr Himanshu Kapania, Telecom

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5. Company Secretary:
Mrs Hutokshi R Wadia

6. Audit Committee:
Mr Arun Kannan Thiagarajan - Independent Director
Mr BV Bhargava - Independent Director
Mr ML Apte - Independent Director
Mr Dilip Gaur - Managing Director

7. Nomination and Remuneration Committee:

Mr Kumar Mangalam Birla - Non Executive Director
Mr ML Apte - Independent Director
Mr. Cyril Shroff - Independent Director

8. Stakeholder Relationship Committee:

Mr BV Bhargava - Independent Director
Mr Cyril Shroff - Independent Director
Mr ML Apte - Independent Director
Mr Sushil Agarwal - Whole Time Director and CFO

9. Corporate Social Responsibility Committee:

Mrs Rajashree Birla - Non Executive Director
Mr BV Bhargava - Independent Director
Mr Shailendra K Jain - Non Executive Director
Mr Dilip Gaur - Managing Director

10. Finance Committee:

Mr BV Bhargava — Independent Director
Mr ML Apte — Independent Director
Mr Sushil Agarwal — Whole Time Director and CFO

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11. Risk Management Committee:
Mr. BV Bhargava — Independent Director
Mr. Arun Kannan Thiagarajan - Independent Director
Mr. ML Apte — Independent Director
Mr. Dilip Gaur — Managing Director
Mr. Sushil Agarwal — Whole Time Director and CFO
Mr. HK Agarwal — COO - Fibre Business
Mr. ER Raj Narayanan — Group Executive President – Chemicals
Mr. Thomas Varghese — Business Head – Textiles

12. Account and Finance Head-Rehla Division:

Mr. Brajesh Kumar

13. H.R Head-Rehla

Mr. Vijay Dandiwala

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 ADITYA BIRLA CHEMICAL
(INDIA) LIMITED
Aditya Birla Chemicals (India) Limited (formally Bihar caustic and
chemicals limited) was incorporated as a joint venture of the Aditya Birla
Group and the Bihar State Industrial Development Corporation. The unit
was set up with the objective of catering to the caustic soda
requirement of Hindalco Industrial Limited, and to contribute towards
the economic development of the backward region of Palamu District in
Jharkhand.

Commissioned in 1984 with an initial caustic soda capacity of

33000tpa,the company has since grown to become the leading soda
producer in the eastern region of the country. The company has
commissioned a 30mw capacity power plant in the year 2000 and
simultaneously, the caustic plant capacity was enhanced to 51048tpa. In
the year 2006, the capacity was increased to 78,750tpa by converting
the mercury cell technology to the more environment – friendly
membrane cell technology supplied by world renowned technology
supplier UHDENORA, Germany, presently, the installed capacity stands
at 105000tpa.

For value addition and effective utilization of chlorine, the company has
commissioned a 12000tpa aluminium chloride plant in the year 2007
and a17500tpa stable bleaching powder (SBP) plant in 2008. SBP is
marked under the brand name Shaktiman. Aluminium chloride is the
principle catalyst used in the fried craft reaction and widely used in
pharmaceuticals, chemical intermediates, agrochemicals, dyestuffs and
pigments, sanitation, sewage systems, tanning process, organic
synthesis and other application.

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The company acquired its major competitor unit in the eastern region,
the chloro chemicals division of Konoria Chemicals based in Renukoot ,
in may 2011 to enrich the portfolio of the Aditya Birla Chemicals
business .with the addition of this unit, named Renukoot Chemicals
Division (RCD),the Aditya Birla Chemical business ranks as one of the
leading players in the Chlor-alkali segment in India.

This acquisition added about 115000tpa to the existing 105000tpa

caustic capacity of the company with the already existing capative
power production capacity of mwh at RC , the company has fianlised
brownfield expansion by additional 150tpa of caustic soda capacity.

RCD utilizes the chlorine available in its value added products like SBP,
Poly Aluminium Chloride (PAC), Aluminium chloride (ALCL3) and
chlorinated paraffin wax (CPW). The first in the Chlor-alkali sector of
India to be accredited with certification of ISO 9001 ,14001,OHSAS18001
and SA8000 ,the company.

ORGANISATIONAL INFRASTRUCTURE
 However there is a fully fledged well developed and plannned
town-ship within the premises well equipped with playground,
staff club with sporting facilities etc.

 The company provides furnished accommodation to its employees

and there is non-stop power supply from its captive power plant.

 The company provides drinking water and various other facilities

to nearby areas.

 ABCIL premises are fully of gardens & greeneries.

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 There are many club like Rotary, Rotaract, and Mahila Mandal
which gives ample opportunity to satisfy the creative I social side
of employees.

 Regular culture events and fairs mark the vibrant atmosphere of

ABICL.

 The company has a CBSE affiliated Aditya Birla Public School with
independent school building equipped with modern facilities like
computers, laboratories and rich library etc.

 The company has a 10 bedded own hospital including an ICU & is

well equipped with all ultra-modern equipment.
 The beautiful temples stand inside the premises which are quite a
good attraction with the devotees of the area.

Company Product

Sr. No. CAP Product Name

1 Caustic Soda Lye
2 Caustic Soda Flakes
3 Hydrochloric Acid
4 Chlorine
5 H2 Gas

Sr. no. VAP Product Name

1 Aluminum Chloride (ALCL3)
2 Stable Bleaching Powder (SBP)

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Details of Raw Materials Consumed and place of purchase:-

S.No. Raw Material Consumed Place of Purchase

1. Salt Gujarat
2. Alpha Cellulose. Nagda (MP)
3. Aluminium Ingots Renukoot (UP)
4. Barium Carbonate Raipur (Chhattisgarh)
5. Coal CCL(Jharkhand)
6. Lime Jodhpur
7. Sulphuric Acid & Others Allahabad,
Gorakhpur(UP)

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 Chapter 2
Company Product

1. Caustic Soda (NaOH):

1. It is used in Aluminium based company.
2. It is used in pulp and paper, textile, drinking water, soap,
detergent and drain cleaner.

Manufacturing Process: It is produced by using an aqueous solution

called as ‘brine’ serves as basic raw material for the production of
caustic soda. The solution is purified by the series of mechanical
/chemical process. The ion exchange membrane cell is prepared by
dissolving raw salt into the brine which comes back from the
electrolysis plant.

Technical Data of the Plant:

Product Capacity
Caustic Soda 300 TPD
Chlorine Gas 1096 TPD
Hydrogen Gas 66149 Nm3

Chemical and utilities:

Raw material : Salt
Utilities : Process water, electric power, steam, cooling water,
Nitrogen
Chemicals : Na2CO3, BaCO3, HCL, NaHSO3, NaOH, H2SO4

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 Primary system in the plant is the BRINE SYSTEM where salt is
dissolved in the water. These units are designed to produce brine
equivalent to 300 TPD NaOH (100%) productions.

The primary Brine system comprises of the following systems :-

1. Brine Saturation
2. Brine Precipitation
3. Brine Clarification
4. Brine Filtration
5. Brine Polishing

The secondary brine system consists of following

1. Ion Exchange System 2. Brine Heat Conditioning

Bine Saturation Saturated brine solution is prepared in saturators .salt

is charged into the saturators. depleted brine from the process is fed
into the saturator.DM water is added to make up for the water which
is lost by diffusion through diffusion through the membrane.

Brine Precipitation Saturated brine overflows from the saturated into

the precipitation tanks where it is treated chemically to precipitate
the impurities by adding sodium carbonate, Barium carbonate &
NaOH.

Brine Clarification The impurities precipitated out in the earlier stage

are removed in the clarifier. The underflows from the clarifier contains
solids and is pumped to the sludge filtration unit .The filtrate is recycled
back to clarifier.

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Brine Filtration The suspended solids in clarified brine are removed by
passing through a bed of anthracite filters. out of five filters, one filter is
stand-by-which is backwashed and kept ready.

Secondary Bine Purification This stage comprises two steps- polishing

filtration(candle filters)and ion exchange- and achieves the objective
of producing ultra-pure brine required for membrane cell operation.
polished brine after heating through brine heater is passed through
two ion exchange columns connected in series. the columns are filled
with a special caution exchange resin, which provides active sites for
absorption of residual calcium and magnesium still present in brine.
pure brine from ion exchange columns is further passed through
brine heat exchanger. this heat exchanger heats up the brine to temp
required at cell inlet.

Anolyte Dichlorination The depleted brine containing dissolved

chlorine (called anolyte) is dechlorinated in two stages :vacuum
dichlorination and chemical dichlorination. A part stream of
chemically de chlorinated brine is be purged out of the system to
keep the Sulphate within the desired levels.

Chlorate Destruction Chlorate builds up in the brine system due to

secondary electro chemical reactions in the cells. part stream of the
anolyte is pumped into the chlorate destruction tank. under influence
of HCL and heat, the chlorate ions break up liberating chlorine ,which
is flushed away into the main chlorine header.

Electrolysis No. of electrolysers and no. of elements in each electrolyser

is decided based on the rate of production of caustic. Brine flows into
the anode chamber & weak caustic flows into the cathode chamber.cl2
is liberated at the anode surface and the brine in the anode
compartment is depleted.h2 is generated at the cathode surface and OH
ions combine with the Na+ ions diffusing through membrane. a two-
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phase mixture of 32%NaOH and hydrogen overflows into the catholyte
header.

Catholyte System, Caustic Evaporation and Caustic Storage The two

phase mixture of NaOH and hydrogen gets separated
in the catholyte header itself. other part is sent for internal consumption
within the plant .48% caustic from caustic evaporation unit is taken in
caustic storage tank for tanker filling by caustic transfer pumps.

Chlorine treatment, Compression, Liquefaction, Storage and Filling:

The water vapour is condensed in series of coolers. The gas is then
passed through the chlorine washing tower.
Liquid chlorine from the liquefiers is sent to chlorine buffer vessel liquid
chlorine from buffer vessel is pumped for filling through liquid chlorine
pumps.

Hydrogen Treatment: Hydrogen gas leaving the cells is saturated with

water vapour and cooled. the cooled gas is passed through filters to
remove the NaOH aerosols.

Waste air system & hypo storage: All chlorine bearing waste streams
from the plant are led to the waste air de chlorination .

HCL Synthesis Unit: HCL is produced by burning hydrogen and chlorine

and absorbing the resulting combustion gases in water to yield a 32 %
HCL solution.

Solid & Liquid Waste:

 Solid effluents

 Liquid effluents

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  Utilities: The utilities mainly steam DM water and process water,
fire water, drinking water will be made available by ABCIL at
battery limit.

Chilled Water Unit:

The chilled water unit (package unit) is vapour absorption type machine.
the chilled water unit by chilled water pump and then to the consumers.
Cooling Water Unit: The cooling water return from the various
consumers is sent to the cooling tower (package unit).part of the cooling
water dosing unit is provided for cooling water system.

Nitrogen Generation System: Nitrogen is generated in nitrogen PSA unit

and is stored in nitrogen receiver. from receiver nitrogen is supplied to
the internal consumers.

Air System: Instrument air system consists of instrument air compressor

and air drying unit.

2. Liquid Chlorine :
Uses
 Chlorine is used in the purification of drinking water, as bleaching
agent in pulp paper and textile industries.
 It is also used in raw material/intermediate chemical in the
manufacture of PVC plastic, paraffin waxes, synthetic rubbers,
pesticides / insecticides, inorganic / organic chemicals,
pharmaceuticals etc.

3. Hydrochloric Acid:

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Hydrochloric acid is a solution of hydrogen chloride (HCL) in water that
is highly corrosive, strong mineral acid with many industrial uses.it is
found naturally in gastric acid.
Uses:
 scale production of vinyl chlorine for PVC plastic, and MDI/TDI for
polyurethane.
 it is also used in numerous smaller scale application,including
household cleaning ,production of gelatin and other food
additives,decaling,leather processing,and swimming

4. Sodium Hypochlorite :
Sodium hypochlorite is a chemical compond with the formula NaClO.
Sodium hypochlorite solution commonly known as bleach.

Uses :
 It is used as disinfectant or a bleaching agent

5. Aluminium Chloride:
Aluminium chloride (Alcl3) is the main compound of Aluminum and
chlorine .it is white, but samples are offen contaminated with iron
trichloride, giving it a yellow colour.

 It is mainly used in production of aluminium metal, and large
amounts are also used in chemicals industry. 

6. Stable Bleaching Powder:

Calcium hypochlorite is a chemical compound with formula Ca(C1O)it is
widely used for water treatment and as a bleaching agent. This chemical
is considered to be relatively stable and has greater available chlorine
then sodium hypochlorite (liquid bleach).

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  Calcium hypochlorite is used for the disinfection of drinking water
or swimming pool water.it is also used as a sanitizer in outdoor
swimming pools in combination with a cyan uric acid stabilizer,
which reduces the loss of chlorine due to ultraviolet radiation.
 It is also used in bleaching cotton and linen, bathroom cleaners,
household disinfectant sprays, moss and algae removers, and wild
killers.

7. Compressed Hydrogen Power: Power is generated only for the

company needs and not for the commercial purpose.


Present Capacity of Plants

Products Annual Production
 Capacity (Rehla)
1. Caustic Soda  108,000,000.00KG
2. Liquid Chlorine  77000000.00KG
3. Hydrochloric Acid  43750000.00KG
4. Sodium Hypochlorite 18000000.00KG
5. Aluminium Chloride 14965000.KG
6. Hydrogen Gas 60000.KG
7. Stable Bleaching Powder 21000000.00KG
 

 

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 Chapter 3
Working Capital Management

Meaning:
Working Capital may be defined as fund available and required for
carrying out day to day activities and transactions of companies. It
represents operating liquidity available to a business, organisation or
other entity and also considered as a part of operating capital. Gross
working capital is equal to current assets. It is required by the firm to
continue its operations by meeting operational expenses including long
and short term debt. It is calculated as current assets minus current
liabilities. The management of working capital involves managing
inventories, accounts receivables and payables and cash.

Objectives of working capital:

 To carry out day to day transactions and overhead costs.
 To pay salaries and wages.
 To purchase raw materials.
 To provide credit facilities to customers.

Factors affecting working capital:

1. Nature of business:
The requirement of working capital depends on the nature of
business. The nature of business is usually of two types:
Manufacturing and Trading Business.
In case of manufacturing business lots of working capital is
required for purchasing raw material and converting them into
finished goods, whereas less working capital is required in case of
trading business as goods are directly sold after converting them
into finished goods.
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2. Scale of Operations
There is a direct link between the working capital and the scale of
operations. In case of big businesses or organisations more
working capital is required in comparison to small businesses or
organisations.

3. Business Cycle:
The need for the working capital is affected by various stages of
the business cycle. During the boom period, the demand of the
product increases and sales also increases. Therefore for more
working capital is required. On the other hand during the period of
depression, the demand declines and its affects both the
production and sales of goods. Therefore, in such a situation less
working capital is required.

4. Credit Allowed and availed:

The enterprises which sells goods on cash payment basis need
little working capital but those who provide credit facilities to the
customer need more working capital. The business which avails
credit also requires less working capital.

5. Availability of Raw Material :

Availability of raw material also influences the amount of working
capital. If the raw material used by the enterprises is available
easily throughout the year, then less working capital is required,
because there will be no need to stock it in large quantity. But if
the raw material is not easily available then more working capital
is required, as raw material are required to be stored.

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Importance of adequate working capital

1. Solvency of business: Adequate working capital ensures

uninterrupted flow of production process. The finished goods can
be sold thereby increases in sales turnover and results in the
sufficient cash in hand. In this way, solvency of the business is
maintained.

2. Cash Discount: If proper cash balance is maintained, the business

can avail of the cash discount facilities offered to it by suppliers.

3. Goodwill: Whenever the solvency of the business is maintained,

the business concern can make the payments within the stipulated
time very easily. If so, the goodwill of the business concerned is
created and maintained in coming days.

4. Liquidity: An able businessman can determine the extent of

working capital requirement. In this context, the liquidity of the
business concern is maintained with the help of adequate working
capital.

5. Easy Loan: If a business concern maintains high solvency of the

business and goodwill banks and financial institutions are ready to
provide credit facility such as loans and advances. In this way, the
business concern gets the loan very easily.

6. Regular supply of raw material: Adequate working capital ensures

regular supply of raw material for continuous flow of production.

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Operating Cycle or Circular flow of working capital:
The operating starts with the time of placing the order for the time of
placing the order for receiving the raw materials and ends with the time
of receiving cash from the sales of finished goods.

Working Capital Cycle

Cash

Raw material,
Debtors wages,
Expenses

Revenue
Stock
(Sales)

Finished
Work in
goods /
Progress
Services

Generally, gross operating cycle of a firm is equivalent to the span of the

inventories and conversion period of the receivables.

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Gross Operating Cycle = RMCP+WIPCP+FGCP+RCP

 RMCP (Raw materials conversion period) = Average Stock of Raw

Material / Raw Material Consumption per Day

 WIPCP (Work in progress conversion period) = Average Stock of

Work in progress / Total cost of production per day

 FGCP (Finished goods conversion period) = Average Stock of Finished

goods / Total cost of Sales per day

 RCP (Receivables conversion period) = Average Accounts Receivables

/ Net credit Sales per day

Sometimes, business concern may receive the raw material on credit

basis. If so, cash cannot be paid immediately. Cash will be paid at the
end of the credit period. In this case defer payment period is deducted
from the gross operating cycle period to get net operating cycle period.

 Net Operating cycle period = Gross Operating cycle period – Payable
Deferral Period.
 Payable Deferral Period = Average Payable / Net Credit Purchase per
day.

SOURCES OF WORKING CAPITAL

The working capital requirements should be met both from short term
as well as long term sources of funds.
 Financing of working capital through short term sources of funds has
the benefits of lower cost and establishing close relationship with
banks.

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 Financing of working capital through long term sources provides the
benefits of reduces risk and increases liquidity.

DANGERS OF INADEQUATE WORKING CAPITAL

 Operating inefficiencies creep in when it becomes difficult of meet
day-to-day commitments.
 It becomes difficult to implement operating plans and achieve firm’s
targets.
 It directly affects firm’s liquidity position and the firm may find it
difficult to honor short-term obligations.
 It cannot by its requirements in bulk and cannot avail of discounts it
stagnates growth.
 It becomes difficult for the firm to exploit favorable market
conditions and undertake profitable projects due to non-availability
of working capital funds.
 It becomes impossible to utilize efficiently the fixed assets due to
non-availability of liquid funds thus the firm’s profitability would
deteriorate.
 The rate of return on investments also falls with the shortage of
working capital.

MANAGEMENT OF WORKING CAPITAL

Guided by the above criteria, management will use a combination of
policies and techniques for the management of working capital. These
policies aim at managing the current assets (generally cash and cash
equivalents, inventories and debtors) and the short term financing, such
that cash flows and returns are acceptable.

 Cash management - Identify the cash balance which allows for the
business to meet day to day expenses, but reduces cash holding
costs.

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 Inventory management - Identify the level of inventory which allows
for uninterrupted production but reduces the investment in raw
materials - and minimizes reordering costs - and hence increases cash
flow.

 Debtor’s management - Identify the appropriate credit policy, i.e.

credit terms which will attract customers, such that any impact on
cash flows and the cash conversion cycle will be offset by increased
revenue and hence Return on Capital (or vice versa); see Discounts
and allowances.

 Short term financing - Identify the appropriate source of financing,

given the cash conversion cycle: the inventory is ideally financed by
credit granted by the supplier; however, it may be necessary to utilize
a bank loan (or overdraft), or to "convert debtors to cash" through
"factoring"

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 Chapter 4
GST(Goods and Service Tax)

About GST

Goods and Service Tax (GST) is an indirect tax which is introduced by the
Government of India on 1st July 2017, this is applicable throughout the
India, it replaced multiple taxes levied on goods and services by central
and state governments of India.

In other words, GST is a comprehensive, multiple stage, destination

based tax that will be levied on every stage of value addition.

Multiple-Stage:

We know that there are many change-of-hands as an item goes through

its supply chain:

Manufacturer > Wholesaler > Retailer > Consumer. Here there are five
stages:

1st Stage: Purchase of raw materials by the manufacturer

2nd Stage: Production or manufacturing of goods by the manufacturer

3rd Stage: Sold to Wholesaler

4th Stage: Sold to retailer

5th Stage: Sold to Consumer

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So, GST as being multi-stage tax it will be levied on each of the above
stages.

Value Addition:

Value addition means the value added to the product in its

manufacturing stage from raw material to finished goods.
For example:- The manufacturer who makes shirts buys yarn. The value
of the yarn increases when it is woven into a shirt. The manufacturer
sells the shirt to the warehousing agent whose duty is to attaches labels
and tags on each shirt. Which is another addition of value after this the
warehousing agent sells it to the retailer. Retailer sells the product to
the consumer. The GST is levied on each step of value addition in the
manufacturing stage.

Destination-Based:
It means where the good is being sold. A good that was manufactured in
Delhi is being sold to the consumer in Mumbai, Maharashtra. Since GST
is being levied at the point of consumption, so the entire tax revenue
goes to Mumbai.

GST in India:
GST was introduced by the Government of India on 1 July 2017. It is a
type of indirect tax which was applicable throughout the India which
replaced multiple taxes levied by central and state governments. It was
introduced by the new Act “The Constitution Act 2017”. GST is governed
and controlled by GST council under the chairmanship of our Finance
Minister. Under GST, all goods and services are taxed at rate 5%, 12%,
!8% and 28%. It was introduced with a purpose of removing multiple tax
effect and for maximizing the profit of the government. The rates of GST
in India are double of four times that is being levied in other countries.

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GST Slab Rates:

 5% on basic consumption items like, mustard oil food grains like

rice wheat etc.
 12% on processed foods.
 18% on soaps, oil, toothpaste, refrigerator, smartphones.
 28% on white goods, luxury cars, pan masala, tobacco, aerated
drinks.

Components of GST:

There are 3 components GST:

1. Central Goods and Service Tax (CGST): It is collected by the central

government of a country on an intra-state (within the
manufacturing state) sale.

2. State Goods and Service Tax (SGST): It is collected by the state

government of a country on intra-state and (within the
manufacturing state) sale.

3. Integrated Goods and Service Tax (IGST): It is collected by the

central government of a country on inter-state (outside the
manufacturing state) sale.

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Advantages of GST:
Following are the advantages of GST:

1. Remove cascading tax effect: Currently there are number of tax is

being charged on the supply of goods and services but after GST
there will be only one tax only. So, no tax on tax will be charged, this
is what the cascading effect which will be removed after GST.

2. High threshold for registration: Today the businesses with turnover

up to five lakhs or more than five lakhs is liable to pay VAT. Similarly,
the service providers with turnover more than ten lakhs are liable to
pay Service Tax. But under GST it has be increased to twenty lakhs
thus exempting and providing relief to many small traders and service
providers

3. Composition scheme for small businesses: GST has a scheme of

lower tax for small businesses with turnover between twenty lakhs to
fifty lakhs. It has been proposed to increase to seventy lakhs. Which
will decrease tax burden for many small businesses in India.

4. Simpler online procedure under GST: Registering or filing return

procedure under GST is very simple in comparison to old tax regime,
no need run all the time around tax offices to get various registered
under any tax like excise duty, VAT or service tax.

5. Increase efficiency in logistics: Currently logistics industry had to

maintain warehouses across the states to avoid the current CST and
state entry taxes on inter-states movement. Many times, these
warehouses were forced to operate below their capacity this
increases their operating cost. But when GST will go live, these
restrictions on inter-state movement of goods will be lessened and
the logistics sector will improve

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6. Regulating of unorganised sector: Many industries in India largely
unregulated and unorganised. Under GST there is a provision for it,
which will bring accountability and regulation to these industries.

7. Transparency and less corruption: GST will reduce corruption and tax
evasion as all money spent will be reported for the taxation purpose
and retailer will not be able sell products without bill hence tax
evasion will also get reduced a lot.

8. Some other advantages: One market one tax, improved compliances

and revenue collections, efficient use of resources, increase in GDP
and FDI, cheaper products and exports etc. are some other
advantages.

Disadvantages of GST:
Followings are the disadvantages of GST:

1. Change in business software: In India many businesses use

accounting software or ERPs for filing tax returns which includes
excise, VAT and service tax incorporated in them. GST will require
business to change their ERPs by upgrading, changing or by
purchasing the software related to business.

2. Increase in operating cost: Many businesses in India don’t employ

tax professionals to pay tax, don’t purchase computer for keeping
details of business transaction or for filing return and prefer
traditional way of doing these all work. However, they will now
require these all which will increase their operating cost.

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3. Policy change during the middle of the year: Due to the change in
tax policy in the middle of the year many businesses in India is facing
problems in shifting from the old tax structure to new tax structure in
a short period of time, which is not very easy.

4. Online Procedure: In GST the procedure of filing return, payment or

any other work is online. Many businesses in India is not technically
ready to do these work, which is also one of the major problem.

5. Tax burden: Small and businesses in manufacturing sector will face

heavy tax burden because before GST the businesses with turnover
one crore fifty lakhs were have to pay excise duty. But after GST it has
been reduced to 20 lakhs, thus increasing tax burden on many small
businesses.

6. No Clarity on tax holiday: Before GST many manufacturing industries

like textile, FMCG and pharmaceutical industries were enjoying tax
holidays and state benefit schemes. But in GST there is no notification
regarding these benefits, which may increase the cost of industries.

7. Expensive Banking and Insurance: Banking services will become

more expensive after GST, as government has decided to tax them at
a higher rates in compare to previous rates.

39 | P a g e
 Chapter 5
Financial Statements

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41 | P a g e
Analysis of Financial Statement through Ratio:
Ratio Analysis:
Ratio analysis is the powerful tool of financial statements analysis. A
ratio is defined as “the indicated quotient of two mathematical
expressions” and as “the relationship between two or more things”. The
absolute figures reported in the financial statement do not provide
meaningful understanding of the performance and financial position of
the firm. Ratio helps to summarize large quantities of financial data and
to make qualitative judgment of the firm’s financial performance.

1. CURRENT RATIO/WORKING CAPITL RATIO

Current Ratio is a measure of liquidity and it is used for the analysis of
short term financial position or liquidity of the company. It is the
relation between current assets and the current liabilities. Thus,

CURRENT RATIO = CURRENT ASSETS /CURRENT LIABILITIES

Current assets include cash, marketable securities, bill receivables,

sundry debtors, inventories and work-in progresses. Current liabilities
include outstanding expenses, bill payable, dividend payable etc.
A relatively high current ratio is an indication that the firm is liquid
and has the ability to pay its current obligations in time. On the hand
a low current ratio represents that the liquidity position of the firm is
not good and the firm shall not be able to pay its current liabilities in
time. A ratio equal or near to the rule of thumb of 2:1 i.e. current
assets double the current liabilities is considered to be satisfactory.
Particular 2017 2018
Total Current Assets 4932.23 8136.92
Total Current Liabilities 2533.37 6175.33
Current Ratio 1.95 1.32

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2. QUICK RATIO/ACID TEST RATIO/LIQUID RATIO
Quick Ratio is the relation between liquid assets and current
liabilities. An asset is said to be liquid asset if it can be converted
easily into cash within a short period of time without losing its value.
It measures the firms’ capacity to pay its current liabilities
immediately.

QUICK RATIO = QUICK ASSETS/CURRENT LIABILITIE

Where Quick Assets are:
1) Marketable Securities
2) Cash in hand and Cash at bank.
3) Debtors.

A high ratio is an indication that the firm is liquid and has the ability
to meet its current liabilities in time and on the other hand a low
quick ratio represents that the firms’ liquidity position is not good.

As a rule of thumb ratio of 1:1 is considered satisfactory. It is

generally thought that if quick assets are equal to the current
liabilities then the concern may be able to meet its short-term
obligations. However, a firm having high quick ratio may not have a
satisfactory liquidity position if it has slow paying debtors. On the
other hand, a firm having a low liquidity
Position if it has fast moving inventories.

QUICK ASSETS = CURRENT ASSETS- INVENTORY

Particular 2017 2018

Total Quick Assets 3199.49 5545.26
Total Current Liabilities 2533.67 6175.33
Quick Ratio 1.26 0.89

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3. Working Capital:
It refers to total capital available for daily operations.

Working Capital = Current Asset – Current Liability

Particular 2017 2018

Total Current Assets 4932.23 8136.92
Total Current Liabilities 2533.67 6175.33
Working Capital 2398.56 1961.59
Company working Capital Decreased in 2018 to 1961.59 crore which
shows company reduced capability to pay off their current liabilities
effectively.

4. Return on Assets:
It measures the profitability of the firm in terms of assets employed
by the firm.

Year 2017
Profit After Tax (PAT): 1560.00 crore
Total Assets: 19851.00 crore
Return on Assets = (PAT/Total Asset)*100
(1560.00/19851.00)*100
=7.85

Year 2018
Profit After Tax (PAT): 1768.66 crore
Total Assets: 53728.86 crore
Return on Assets = (1768.66 / 53728.86) * 100
=3.29

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5. Net Profit

It measures profit earned by the firm on the sales made. It represents

the profit of company after deduction of all expenses including tax. That
is Profit after Tax is compared with Net Sales of company

Net profit = (PAT/NET SALES) *100

Year 2017
Net profit % = (1560/11,111.06)*100 = 0.140428*100

= 14.04%

Year 2018
Net profit = (1768.66/15,848.34) *100 = 0.1115413*100
= 11.15%

Net profit of company decreased from 14.04 to 11.15% in 2018.

In cash flow statement we can see that company invested more in 2018
and paid more dividend in 2018 as compared to 2017 resulting decrease
in net profit.

6. Stock turnover Ratio:

Stock turnover ratio indicates the relationship between “Sales” and

“average inventory”. It indicates how efficiently the firm’s investment
in inventories is converted to sales and thus depicts the inventory
management skills of the organization.

Stock Turnover ratio = Sales / Average inventory

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Year 2017
Stock turnover ratio = 11,111.06 / 1732.74

= 6.41

Year 2018
Stock turnover ratio = 15,848.34 / 2591.66

= 6.11

After analysis we found that there is a slight decrease in the ratio of

company that is the efficiency to convert its investment in inventories to
sales is effected by companies operations.

Although such negligible variations are acceptable in grasim industry

and can be controlled.

7. Return on Capital Employed

Return on capital employed (ROCE) is a financial ratio that measures a

company's profitability and the efficiency with which its capital is used.
In other words, the ratio measures how well a company is generating
profits from its capital. The ROCE ratio is considered an important
profitability ratio and is used often by investors when screening for
suitable investment candidates.

ROCE = EBIT / Capital employed

[Capital employed = Total asset – current liability]

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year 2017
ROCE = 2124.94 / 19851.10-2533.67 = 2124.94 / 17317.43

= 2124.64 / 17317.43

= 0.122

Year 2018
ROCE = 2785.75 / 53728.86 – 6175.33 = 2785.75 / 47553.59

= 2785.75 / 47553.59

= 0.058

Return on Capital Employed has decreased in 2018 due to increase in

total assets of company to 53,728 in 2018.

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 Chapter 6
Findings
After going through the financial statement of Grasim Industries
Limited, I found that:

 There are drastic change in figures of balance sheet of 2018 and

2017. Which includes
i. Big change in Investments from 7,424.09 in 2017 to
33,586.74 in 2018. (in crore)
ii. Change In value of other intangible assets by almost
1000 crores.
iii. This resulted increase in value of assets from 19,581
crore in 2017 to 53,728 in 2018.
iv. Similarly increase in value on liability side of balance
sheet due to increase in Other Equity and Total Current
Liability.

 Company also Acquired Aditya Birla Capitals into their own

working.

 Effect could be noticed by analyzing Ratios, a drop in current as

well as quick ratio.

 Working Capital also decreased from 2398.56 in 2017 to 1961.59

in 2018.

 A Fall in other ratios could also be noticed from above statements.

48 | P a g e
 Chapter 7
Recommendations
In order to increase profitability, grow efficiently, expand business and
improve customer services company should do the following:

 The time of carrying out all the activities such purchasing of raw
material, production of chemicals, etc. should be decreased.

 Company should try to pay off all its debt and unsecured loans
very quickly and at a higher rate of interest.

 Company to try to increase the current assets and liquid assets to

pay off all of its liabilities.

 Company should focus more on the safety management.

 Company should make good and best plan to carry out its activities
and to face problem.

 Company should have adequate reserves and surplus to meet it

fund requirement and carry out day to day activities.

 Company should also scan the dynamic environment and keep
seeing the changing government policies.

49 | P a g e
 Chapter 8
Conclusion
At last I want to say that the management of working capital is very
much necessary and essential for running the business efficiently and
effectively as its help in carrying out day to day activities to achieve
future goals and objectives. And for every successful company
management of working capital plays an important role similar to the
backbone of our body.

Grasim Industries Limited has a positive working capital which shows

that the company is managing is working capital properly which is taking
the company towards it growths.

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Bibliography:

1. Annual Report 2017-18 pdf

2. www.adityabirla.com
3. I.M. Pandey (Book for Financial Management)
4. www.grasim.com
5. www.accountlearning.com
6. www.youarticlelibrary.com
7. www.cleartax.in

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