Project Report of KMF

A Study on Working Capital Management at KMF
EXECUTIVE SUMMARY
Karnataka Milk Federation (KMF) is the apex body in Karnataka

representing Dairy Farmers Co-operatives. It is the third largest dairy co-
operative amongst the dairy co-operative operatives in the country. In South
India it stands first in terms of procurement as well as sales. One of the core
functions of the Federation is marketing of milk and milk products.
The Corporate Exposure and Learning (CEL) conducted at Karnataka

Milk Federation consist of two parts:-
Part A consists of a general study relating to the organization. It

consists of the kind of industry they belong to and the type of business
undertaken by them. It also consists of information about various divisions,
on how they function, the strategies and policies used by each division and
how they are able to achieve their goals. The study includes the functioning
of KMF with reference to Mc Kinsey’s 7S framework, which is an indicator
to KMF’s performance and for what it is till date.
Part B consists of a detailed study on the Working Capital

Management of the organization. The study states on how the liquidity
position is being maintained by KMF. This study is carried out to find the
financial health of KMF by using various ratios. The objective of this study
is to thoroughly analyze the organization’s solvency, profitability and
performance over the years.
Lal Bahadur Shastri Govt First Grade College, Bangalore 1

CHAPTER 1
INTRODUCTION
INTRODUCTION TO FINANCE:-

Finance if the life blood of a business. The Financial Management

study about the process of procuring and judicious use of financial resources
with a view to maximizing the valued of the firm thereby the value of the
owners i.e., equity shareholders in a company is maximized.
The traditional view of Financial Management looks into the following
functions that a Finance Manager of a business firm will perform.
✔ Arrangement of short term and long term funds from financial

institutions.
✔ Mobilization of funds through financial instruments like Equity
shares, Preference shares, Debentures, Bonds etc.
✔ Orientation of Finance functions with the Accounting function and
compliance of legal provisions relating to funds procurement, use and
distribution.
With the increase in complexity of modern business situation, the role of a

Finance Manager is not just confined to procurement of funds, but his area
of functioning is extended to judicious and efficient use of funds available to
the firm, keeping in view the objectives of the firm and expectations of the
providers of funds.
INTRODUCTION TO WORKING CAPITAL

Working capital management is a significant in financial management

due to the fact that it plays a pivotal role in keeping the wheels of a business
enterprise running. Working capital management is concerned with short-
term financial decisions. Shortage of funds for working capital has caused
many businesses to fail and in many cases, has retarded their growth. Lack
of efficient and effective utilization of working capital leads to earn low rate
of return on capital employed or even compels to sustain losses. The need
for skilled working capital management has thus become greater in recent
years.
A firm invests a part of its permanent capital in fixed assets and keeps
a part of it for working capital i.e. for meeting the day to day requirements.
We will hardly find affirm which does not require any amount of working
capital for its normal operations. The requirement of working capital varies
from firm to firm depending upon the nature of business, production policy,
market conditions, seasonality of operations, conditions of supply etc.
Working capital to a company is like the blood to the human body. Working
capital is the lifeblood of any business firm and shortage of funds for
working capital will lead to business failure. The management of short term
funds. Working capital management if carried out effectively, efficiently and
consistently, will assure the health of an organization.
MEANING OF WORKING CAPITAL:

Working capital is defined as “the excess of current liabilities”.
Current assets are those assets which will be converted into cash within the

current accounting period or within the next year as a result of the ordinary
operations of the business. They are cash or near cash resources. These
include:
✔ Cash and Bank balances
✔ Receivables
✔ Inventory
○ Raw-materials, stores and spares
○ Work-in-progress
○ Finished goods
✔ Prepaid expenses
✔ Short-term advances
✔ Temporary investments
The value represented by these assets circulates among several items. Cash
is used to buy raw-materials, to pay wages and to meet other manufacturing
expenses. Finished goods are produced. These are held as inventories. When
these are sold, accounts receivables are created. The collection of accounts
receivable brings cash into the firm. The cycle starts again.
Current liabilities are the debts of the firms that have to be paid
during the current accounting period or within a year. These include:
✔ Creditors for goods purchased
✔ Outstanding expenses i.e., expenses due but not paid
✔ Short-term borrowings
✔ Advances received against sales
✔ Taxes and dividends payable
✔ Other liabilities maturing within a year.

Working capital is also known as circulating capital, fluctuating capital and

revolving capital. The magnitude and composition keep on changing
continuously in the course of business.
OPERATIONAL DEFINITIONS OF THE CONCEPTS:-
Working capital
Working capital may be regarded as that portion of a firm’s total

capital, which is employed in financing its day-to-day operations such as
cash, debtors, inventories, marketable securities etc., it is the amount of
funds, which a firm holds, in the form of current assets to meet its current
obligations. It’s also known as Revolving and Circulating capital.
CLASSIFICATION OF WORKING CAPITAL:-
Gross Working Capital:

It is the capital invested in the total current assets of the enterprise.
E.g. Cash, Bills receivables, Sundry debtors, Short-term loans, Pre-paid
expenses etc.,
Net Working Capital:

It is the excess of current assets over current liabilities. Or it is the
difference between the current assets and current liabilities.
Negative Working Capital:-

It refers to the excess of current liabilities over the current assets. Its
also known as Working Capital Deficit.
Permanent Working Capital:

It refers to the amount of investment made permanently in current
assets required throughout the year to carry out the business operations
successively. Permanent working capital is to be financed out of long-term
funds but no return can be expected from it. Permanent Working Capital is
also known as regular or fixed or had core Working Capital.
Temporary Working Capital:

It is the additional Working Capital, which is required for financing
the increase in the volume of business operations at different times during
the operating year. Thus it refers to the amount of Working Capital, which
goes on fluctuating or changing from time to time with the change in the
volume of business activities. Its also known as variable or fluctuating
Working Capital. It is to be financed out of short-term funds and some return
can be expected from it.
Current Assets:
Current assets are those assets which change their form and substance,
and which are converted into cash during the normal operating cycle of the
business or within an accounting year. In short, all those assets, which can
be converted into cash within an accounting year, are called Current Assets.
They include cash, short-term securities, debtors, bills receivables and stock
inventory.
Current Liabilities:

Current Liabilities are those claims of outsiders, which are expected to

mature for payment within an accounting year. In other words, it refers to all
short term obligation or liabilities which are required to be repaid within a
period of one year out of short-term or current assets. They include creditors,
bills payables, outstanding expenses and provision for taxation etc.,
Cost of Goods Sold:

It refers to opening stock of finished goods plus purchases of finished
goods plus all direct expenses incurred on finished goods minus closing
stock of finished goods. Alternatively, the cost of goods sold can be taken as
sales of finished goods minus gross profit.
Cash:
Cash is the money, which the firm can disburse immediately without
any restrictions. It includes coins, currency and cheques held by the firm and
balances in bank accounts. Sometimes mere cash items such as marketable
securities or bank time cheques are included in cash.
OBJECTIVES OF WORKING CAPITAL:

The basic objectives of working capital management are as follows:
✔ By optimizing the investment in current assets and by reducing the

level of current liabilities, the company can reduce the locking up of
funds in working capital there by; it can improve the return on capital
employed in the business.

✔ The second important objective of working capital management is that

the company should always be in a position to meet its current
obligations which should properly be supported by the current assets
available with the firm. But maintaining excess funds in working
capital means locking of funds without return.
TOOLS AND TECHNIQUES OF WORKING CAPIRAL ANALYSIS:-
✔ Gross current assets:- This tool tells us the amount invested in the
various components of current assets and its share in a total
investment of the company. By studying this, financial manager is
able to manage efficiently, the working capital, which ensures the
greatest return on its investment, planning and control of funds.
✔ Ratio Analysis: - A ratio is a quotient of two numbers i.e. the relation
of one item to another expressed in a simple mathematical form. Here
we are considering the ratios, which talks about the efficiency of
working capital management. They include:-
Working Capital management

 Current Asset to Total Asset
 Current Ratio
 Net Working Capital Turnover Ratio
 Gross Working Capital Ratio
 Current Asset Turnover Ratio
 Working Capital Turnover Ratio
 Operating Cycle.
Cash Management

 Quick Ratio
 Absolute Liquid Ratio
 Liquid Asset to Working Capital Ratio
 Cash/Bank to Current Asset
I
introduction to Nandini Milk Industry (KMF)
Karnataka Milk Federation – a harbinger of rural prosperity

Karnataka Milk Federation (KMF) is the largest cooperative dairy
Federation in South India, owned and managed by milk producers of
Karnataka State. KMF has over 2 million milk producers in over 10500
Dairy Cooperative Societies at village level, functioning under 13 District
Cooperative Milk Unions in Karnataka State. The mission of the federation
is to usher rural prosperity through dairy development. During the last four
decades of cooperative dairy development by KMF, the dairy industry in
Karnataka has progressed from a situation of milk-scarcity to that of milk-
surplus.
“Quality Excellence from Cow to Consumer” – is the motto of the

Federation to obtain better-quality Milk and milk products from our value
chain (Procurement to Processing to Marketing). Thus milk and milk
products, under “Nandini” brand name, are unmatched in quality made
available to consumers at most competitive prices. In a way Nandini Milk
and Milk Products are “Spreading wealth of health”.
Karnataka Cooperative Milk Producers' Federation Limited (KMF) is the

Apex Body in Karnataka representing Dairy Farmers' Co-operatives. It is the
second largest dairy co-operative amongst the dairy cooperatives in the
country. In South India it stands first in terms of procurement as well as
sales. One of the core functions of the Federation is marketing of Milk and
Milk Products. The Brand “Nandini" is the household name for Pure and
Fresh milk and milk products.

KMF has 13 Milk Unions throughout the State which procure milk from
Primary Dairy Cooperative Societies (DCS) and distribute milk to the
consumers in various Towns/Cities/Rural markets in Karnataka.
The first ever World Bank funded Dairy Development Program in the
country started in Karnataka with the organization of Village Level Dairy
Co-operatives in 1974. The AMUL pattern of dairy co-operatives started
functioning in Karnataka from 1974-75 with the financial assistance from
World Bank, Operation Flood II & III. The dairy co-operatives were
established under the ANAND pattern in a three tier structure with the
Village Level Dairy Co-operatives forming the base level, the District Level
Milk Unions at the middle level to take care of the procurement, processing
and marketing of milk and the Karnataka Milk Federation as the Apex Body
to co-ordinate the growth of the sector at the State level.
Coordination of activities among the Unions and developing market for Milk
and Milk products is the responsibility of KMF. Marketing Milk in the
respective jurisdiction is organized by the respective Milk Unions.
Surplus/deficit of liquid milk among the member Milk Unions is monitored
by the Federation. While the marketing of all the Milk Products is organized
by KMF, both within and outside the State, all the Milk and Milk products
are sold under a common brand name NANDINI.
THE GROWTH PROCESS

The growth over the years and activities undertaken by KMF is summarized
briefly hereunder:
1976- 2010-2011(Up to
77 Jan'11)
12262 Regd./10766
Dairy Co-operatives Nos 416
Funct.
Membership Nos 37000 20.65 Lacs
38.34 / Peak Proc.41.83
Milk Procurement Kgs/day 50000
LKPD
26.26 / Curds: 2.38
Milk Sales Lts/day 95050
LKPD

Cattle Feed
Kgs/DCS 220 2459
Consumed
Daily Payment to
Rs.Lakhs 0.90 584
Farmers
Turnover Rs.Crores 3802.00
World Bank Study - Observations

The World Bank, in its study on the effect of Co-operative dairying in
Karnataka, has pointed out that:
• The villages with Dairy Co-operative Societies are much better off than
those without.
• The families with dairy cattle are economically better than those without
dairy cattle.
• Women who had no control on the household income have better control in
terms of Milk Money.
• A single commodity �MILK� has acted as a catalyst in the change in the
Socio-Economic impact of the rural economy.
• There is a positive impact on those at the lower end of the economic ladder
both in terms of landholding and caste.
PERSPECTIVE PLAN 2010

After the closure of OF-III project. Government of Karnataka and NDDB

signed an MOU during February 2000, for further strengthening the Dairy
Development Activities in Karnataka with an outlay of Rs.250 Cores.
Consequent to the announcement of new lending terms and conditions by
NDDB through an evolution of an action plan - Perspective 2010 to enable
the dairy cooperatives to face the challenges of the increased demand for
milk and milk products by focusing efforts in the four major thrust areas of
Strengthening the Cooperatives. Enhancing Productivity, Managing Quality
and building a National Information Network, plans are under
implementation.
FUTURE VISION
To consolidate the gains of Dairying achieved in the state of Karnataka and
with a view to efficiently chill, process and market ever developing and
increasing milk procurement with an utmost emphasis on the Quality and in
the process conserve the socio-economic interests of rural milk producers,
the Govt. of Karnataka through KMF has proposed to undertake several
projects with financial and technical support of NDDB for which an MOU
was signed between Govt. of Karnataka and NDDB on 10th Nov. 2004.
PROJECTS:
• Channaraypatna Milk Powder Plant consisting of 30 MT Powder Plant, 4
LLPD Dairy and butter making facility - Established & UHT of 1LLPD is
being commissioned
• Proposed for establishment of Cattle Feed Plants
- Hassan 300 MTPD Capacity - project execution under progress
- Shimoga 300 MTPD Capacity
- Challagatta (Near B'lore) 500 MTPD Capacity
• Multi packaging unit and Ice Cream Plant at Bellary Milk shed area.
GOI PROJECT - RKVY (Rashtriya Krushi Vikas Yojane)

• Fodder densification unit at different place of capacity 10 Tones each.
• Bio Security measures at Nandini Sperm Station, unit of KMF
• Strengthening of Training Centers at Bangalore, Mysore, Dharwad.
• Strengthening Works at Bijapur, Gulbarga, Bidar & Bellary Daily.

Other GOK Financial Support:

1. To support Milk Producers of DCS members GOK is providing an
amount of Rs.2.00 per liter as incentive to the milk producer from 2008-09
onwards.
2. GOK is providing financial assistance for strengthening Dairy
Development infrastructure facilities at Northern Karnataka milk unions
jurisdiction which will also redress regional imbalance as per Dr.
Nanjundappa's report.
UNITS OF KMF
KMF has the following Units functioning directly under its control:
• Mother Dairy, Yelahanka,Bangalore.
• Milk Product Plant, Channarayapatna.
• Nandini Milk Products, KMF Complex, Bangalore.
• Cattle Feed Plants at Rajanukunte/Gubbi/Dharwad/Hassan.
• Nandini Sperm Station (formerly known as Bull Breeding Farm & Frozen
Semen Bank) at Hessaraghatta.
• Pouch Film Plant at Munnekolalu, Marathhalli.
• Central Training Institute, Bangalore & Training Institutes at
Mysore/Dharwad.
• Sales Depots at B'lore, Mysore, M’lore, Hubli, Gulbarga, Tirupathi &
Kanpur.
Vision
• To march forward with a missionary zeal which will make KMF a
trailblazer of exemplary performance and achievements beckoning other
Milk Federations in the country in pursuit of total emulation of its good
deeds?
• To ensure prosperity of the rural Milk producers who are ultimate owners
of the Federation.
• To promote producer oriented viable cooperative society to impart an
impetus to the rural income, dairy productivity and rural employment.
• To a bridge the gap between price of milk procurement and sale price.
• To develop business acumen in marketing and trading disciplines so as to
serve consumers with quality milk, give a fillip to the income of milk
producers.
• To compete with MNCs and Private Dairies with better quality of milk and
milk products and in the process sustain invincibility of cooperatives.

MISSION
• Heralding economic, social and cultural prosperity in the lives of our milk
producer members by promoting vibrant, self-sustaining and holistic
cooperative dairy development in Karnataka State
Objectives
KMF is a Cooperative Apex Body in the State of Karnataka representing
organizations of milk producers' and implementing alround dairy
development activities to achieve the following objectives:
• To ensure assured and remunerative market round the year for the milk
produced by the farmer members.
• To make available quality milk and other premier dairy products to urban
consumers.
• To build & develop village level institutions as cooperative model units to
manage the dairy activities.
• To ensure provision of inputs for milk production, processing facilities and
dissemination of know how.
• To facilitate rural development by providing opportunities for self
employment at village level, preventing migration to urban areas,
introducing cash economy and opportunity for a sustained income.
The philosophy of dairy development is to eliminate middlemen and
organize institutions to be owned and managed by the milk producers
themselves, employing professionals. To sum it up, every activity of KMF
revolves around meeting one basic objective: 'Achieve economies of scale to
ensure maximum returns to the milk producers, at the same time facilitate
wholesome milk at reasonable price to urban consumers'. Ultimately, the
complex network of cooperative organization should build a bridge between
masses of rural producers and millions of urban consumers and in the
process achieve a socio-economic revolution in every hinterland of the State.
Evolution
Karnataka Milk Federation which is most popular as KMF, evolved itself as
a premier and most profitable dairy farmers' organization in the State of
Karnataka.
As an agency in 1975 to implement the World Bank Aided Dairy
Development Projects, Karnataka Dairy Development Corporation (KDDC)
was formed, the company grew itself fast and as it spreads the wings of new

found rural economic activity - Dairying all over the State, the genesis of
apex cooperative body took the shape of KMF in 1983 encompassing entire
State with 13 District Co-operative Milk Unions executing the various
parameters of Dairy activity - organization of Dairy Co-operatives, Milk
Routes, Veterinary Services, Procurement of milk in two shifts of the day,
Chilling, Processing of milk, distribution of milk and also establishment of
Cattle Feed Plants, Nandini Sperm Station, Liquid Nitrogen Supply,
Training Centers - as its main stay.
The entire system was reconstructed on the model of now well known
`ANAND' pattern dairy cooperative societies. Eight southern districts of
Karnataka was considered initially with a target of organizing 1800 Dairy
Co-operative Societies, four Milk Unions and processing facilities were set
up to the tune of 6.5 lakhs per day by 1984.
Under Operation Flood - II &III, project which started in 1984 & 1987
covered the remaining parts of Karnataka. Thirteen milk unions are
organized in 175 talukas of all 20 districts then and the field work was
extended by organizing more dairy cooperative societies. The processing
facilities i.e. chilling centers, milk dairies and powder plants were
transferred in phases to the administrative control of respective cooperative
milk unions and the activities continued to be implemented by these District
Organizations. Additional processing facilities were created & existing
facilities augmented every decade with the help of Govt. / Zilla Panchayat
and NDDB to handle ever increasing milk procurement without declaring
milk holidays. The processing facility as exists at 32.25 lakh liters/day is
further strengthened.
DAIRY SCENARIO:-
Indian Agriculture is an economic symbiosis of crop and cattle

production small and marginal farmers owing land holding engaged in
agriculture. Agriculture provides as employment for short duration in whole
year and part of workforce is virtually unemployed. In the situation dairying
sets right this imbalance in employment.
Dairying sector provides farm families the triple benefits of nutritive
food, supplementary income and productive employment for family labour.

By looking into the progress in dairy sector, there are some

achievements & they are:-
✔ Number One Commodity:- Milk is India’s number one form
commodity in terms of its contribution to the National Economy.
✔ World’s Number One Producer: - In 1995, the United States was

the world’s number one milk producer with its annual milk production
of 72 million tons. In 1998, when India’s annual output is projected at
78 million tons.
✔ Values of Dairy Output:- The value of output from dairying based

on consumer process is high i.e. 1,05,000 crores (1997) and 1,50,00
crores (2000A
CHAPTER 2
RESEARCH

DESIGN
RESEARCH DESIGN
According to Johade Cook “A research design is the arrangement of

conditions for collection and analysis of data in the manner that aim to
combine relevance to research process with economy in procedure”.
✔ “The research methodology or research design constitutes the blue

print for the collection, measurement and analysis of data”
✔ “Research Design is the plan and structure of investigation so
conceived as to obtain answers for the research questions. It includes
an outline of what the researcher will do from writing the hypothesis
and their operational implications to the final analysis of data”
The different types of research design are:

✔ Exploratory Research.
✔ Conclusive Research.
✔ The research design adopted here is of Descriptive Research
Design.
This type of design is followed when
 The objectives are clearly stated.

 The sampling technique going to be adopted is known.
 The sampling size is determined.
 The type of data collection is determined.
DATA COLLECTION:-
The data collection is one of the important aspect in the research
design purely because, it is the way that how we can get answer to the
research question.
SOURCES OF DATA COLLECTION:-

All the details are collected from secondary sources only.
Secondary data includes, the annual reports, financial reports of the
company etc., discussion with the concerned officials has also helped to
verify and evaluate the variations and results either to confirm it..
The data is collected in two ways:
✔ Primary Data
✔ Secondary Data
Primary Data:-

The primary data collection is one of the key tools used by the
researcher for data collection. It is the first hand information collected by the
researcher from the respondents directly. Primary data is collected through
observation and communication
Secondary Data:-
The secondary data is another form of data collection, where the data
is collected from the existing records, company manual and form previously
carried out research work and also through internet.
SCOPE OF THE STUDY:-
The study will help in analyzing the working capital for a period of
five years i.e. from 2005-06 to 2009-2010 of KMF. This is so because ratios
may not prescribe any practical standards, as they are several in numbers for
each element of study. The study helps us in finding out how well the
organization is managing the working capital.
IMPORTANCE OF THE STUDY:-
The study has got importance because working capital affects the day-
to-day operations of the business firm to larger extent. Thus, effective
management of the working capital is required for the smooth functioning of
the business firm.
There is always a need and much importance will be given for
working capital because there is always a time gap between the sales of
goods and receipt of sales proceeds. During this period, working capital is

required for sustaining or maintaining the sales activities. If adequate

working capital is not maintained for this period , the firm will not be able ot
sustain or maintain the sales, since it may not be in a position to purchase
raw materials and pay wages and other expenses and produce the goods for
the sale.
Thus, every firm requires adequate Working Capital to run its
business smoothly and successfully. It is very important to have adequate
Working Capital for that there must be efficiency in managing the working
capital requirements of the firm. However, there is a danger from both
excessive and in-adequate working capital positions.
The following two reasons state its importance.
1. Investment in current assets represents a substantial portion of total
investment.
2. Investment in current assets and the level of current liabilities have to
be geared quickly to the changes in sales.
Thus importance of Working Capital Management is reflected in the fact

that Financial Managers spent a great deal of time managing current
assets and current liabilities.
OBJECTIVES OF THE STUDY:-
✔ To reflect the working efficiency of the concern.

✔ To compare the efficiency of the firm.
✔ To know the working capital of KMF as a whole.
✔ To study the pattern and procedure followed regarding working
capital management in KMF with special reference to:-
➢ Cash Management.

✔ To study the liquidity of assets used. The ratio relating to the liquidity
speaks about how easy the assets can be converted into cash.
✔ To study in detail the reasons for ups and downs in working capital
position, by studying variations in individual assets.
STATEMENT OF THE PROBLEM:-
Working Capital management plays a vital role in an organization as

it represents a substantial portion of the total investment. The importance of
working capital management is reflected in the fact that financial managers
spend a great deal of time in managing current assets and liabilities. When
not managed in proper manner i.e., if the amount invested is more in
working capital it results in funds getting locked, which otherwise may be
invested elsewhere in a profitable manner and at the same time if there is
inadequate investment, it results in shortage of funds and day to day
activities may come to a standstill.
Working Capital analysis depends to a large extent on the study of

each asset independently by calculating ratios, preparing fund flow
statements etc. this techniques help in scientific decision-making process or
in deciding the efficiency in utilizing working capital. Thus the problem
taken for study is “Working Capital Analysis”
The study shows a comparative analysis of the relevant ratios
concerned with working capital of KMF.
.
REFERENCE PERIOD:-
The period covered under this is five financial years i.e. from

2005-2006 to 2009-2010.
CONTEXT OF THE STUDY:-

The context of the study considers the following two important
facts which are very much essential for the study of Working Capital
Management in KMF.
✔ Whether the Working Capital of KMF is sufficient or adequate.
✔ Whether the Working Capital is properly framed and utilized.
REASON FOR THE STUDY:-
The reason or motive for the study on the “Working Capital
Management” indicates the never ending requirements of the working
capital and its importance in the day to day business operations of the
business organization; either it may be a small scale or medium scale or
large scale enterprise.
Therefore, the reason for the study on the “Working Capital

Management” mainly focuses on ‘the advance of working capital and its
proper management during all the times’.
LIMITATIONS OF THE STUDY:-

The study covers a period of 3 years with the available sources i.e.
from 2007-08 to 2009-10.
✔ 10 weeks being a very short time, I have done a study that I feel to be
comprehensive and possible in this time. However, some other details
of methods of analysis could definitely be found which I have missed
out there.
✔ The study has been restricted to the head office in Bangalore.

✔ The study is general.

✔ Inter firm and intra firm comparison is not possible.
✔ Interactions with the company professionals were limited due to their
busy schedule.
✔ Limitations of historical accounts.
✔ Conclusions will be drawn based on theory and supplemented by
figure wherever feasible.
CHAPTER 3
COMPANY
PROFILE

1. COMPANY PROFILE
INTRODUCTION
Mother Dairy a unit of Karnataka Milk Federation which is
located in Yelahanka in the Bangalore North Taluk, was established in a
total area of 28 acres during under of II with a processing capacity of two
lakh liters per day on 7.12.1984 later, the processing capacity of the diary
was expanded to handle 4 Lakh liters per day during 1993-94 with an
additional cost of Rs.3.64 Corers Total of investment for this project is
Rs.10.61 corers. The different facilities available at mother diary are mother
is procuring 2.4 lakh liters milk per day from kolar Milk sadali and
Gowribidnur are possessing bulk milk coolers, through road milk toners.
The Diary is processing and distributing on average 2.25 lakh liters of Milk
per day to the consumers in Bangalore city with the increase in demand for
liquid milk. It is planned to increase the processing capacity of the Diary.
Milk is highly nutritive and majority of Indian population rely on milk
for their protein supplement milk is obtained by milking well bread cows

and buffaloes, either manually or through sterilized milking machine milk
cream, cheese ghee, condensed milk of milk-protein are the dairy products
which are separated from milk through various process. The essence of
organizational study relates to Co-ordination of one department with area
ores in this organization Industrialization is taking place in such a rapid
place that the entrepreneurs or industrialists often forget to know the overall
functioning of all the systems of an organization in the most of corporate
objectives. This may be viewed all one of the reason where most of our
industries one becoming with day to day. The magic behind the successful
entrepreneur in this competition age lines in one detailed knowledge of one
functionary of the organization system.
BACK GROUND
In June 1974, an integrated project was launched in Karnataka
restructure and reorganizes the Diary Industry on the co-operative principle
and to lay foundation for a new direction in diary development. Work on the
first are World Bank aided Diary development was initiated in 1975.
Initially the project covered its southern districts of Karnataka and
Karnataka diary Development Corporation was setup to implement the
project corporation was setup to implement the project. The multi level,
multiunit organization will total vertical integration of all Diary

development activities was setup with cooperative societies at grass root
level, milk unions at the middle level and Diary development cooperation at
the state level as on apex body vested with responsibility of implementing
Rs.51 Corers project. At the end of September 1984 the World Bank aided
project ended and diary development activates continued under operation
flood- II.
The Activities were extended to cover the entire state except costal
taluks ultra Karnataka district and the process of diary development was
continued in the second phase form April -1984 as a successor to KDDC.
After the closure of operation flood. II, the diary Development activates,
which continued under operation flood-III ended on 31.03.1996. The spills
over works are financed by NDDB from 1.04.1996 under different terms and
conditions.
COMPANY OBJECTIVES
Karnataka milk federation (KMF) is a cooperative apex body in the state of
Karnataka representing dairy farmers’ organization and also implementing dairy
development activities to achieve the following objectives.
Providing assured and remunerative market for the milk produced by the
farmer members.

Providing quality milk to urban consumers.To build village level institutions
in cooperative sector to manage the dairy activities.
To facilitate rural development by providing opportunities for self
employment at village level preventing immigration to urban areas,
introducing cash economy and opportunity for steady income.
The Philosophy of dairy development is to eliminate middle men and organize
institutions to be owned and managed by the milk produces themselves,
employing professionals. Achieve economies of scale to ensure maximum
results to the milk producers at the same time providing whole some milk
producers at the same time providing wholesome milk at reasonable price to
urban consumers.
ORGANIZATION STATUS
At the End of March 2000, the network of Rs.8363 Diary co-operative
societies (DCS) have been organized and are spread over 166 taluks of the
total 175 taluks in all the 27 districts of Karnataka. These societies have
been organized into 13 milk unions. The unions are further federation there
are 38 chilling centers (Capacity 12.49 LLPD) 4 number of farm coolers
(Capacity 0.16) 17 number of liquid milk plants and two products diaries
for chilling and processing (21.20 LLPD) conservation (25TPD) and
marketing of Milk. To supply balanced cattle deed, three numbers of cattle

feed plants of 100 TPD capacity with mineral mixture production facility in
one unit are functioning to ensure supply of quality germ plasma, bull
breeding farm and frozen semen bank has been established and is well
stocked with exotic quality high pedigree bill. To impart training one central
training Institute and 3 regional training centers are functioning. Three
diagnostic laboratories have been setup for disease monitoring. Three folder
demonstration farms at sahapur, kottanahalli, kudige and one seed
production farm at sahapur are also operating out of the above units, 16
numbers of dairies, 3 numbers of training centers and 3 numbers of
diagnostic labs are operating under respective unions.
OPERATION STATUS
The average procurement of milk touched a peak of 20.28 LKPD in
November 1999. In March 2000 liquid milk sales was at the level of 15.2
LLPD. The sale of cattle’s feed was 110605 tons during the year 1999-2000.
The turnover of the organization during 1999-2000 was Rs.998.39 Corers.
GENERAL Benefits of frontier technology are made available at framers
these hold sophisticated technology such as artificial insemination electronic
milk testing equipment, electronic mass media Technology, veterinary
biological etc. Are already being made available and further a pilot project
for embryo transfer at field level has been taken up in 1991 and about 237

embryos have been implanted. The project now has been transferred to
Kolar Milk Unions, The activities cove prelusion of complete range of
inputs for basic milk production, processing facilities and marketing
facilities and marketing facilities. A special programmed for control of FMD
was implemented A progeny-testing scheme is also taken up to support
breeding activity. A herd book recording society known as Karnataka
Holstein Friesian Breeders Association (KAHFBA) has been established in
March 1991. With the active
KARNATAKA MILK FEDERATION (KMF)
The Role of Milk Federation
The Karnataka Co-operative milk producers federated Ltd.,
came into existence on 1/5/1984 by federating the milk unions in the state
and thus forming the state level apex organization. The federation is
implementing the project activities. The federation is implementing the
project activities when all the project activities are completed, the main role
of the federation will be to market surplus milk products and to produce and
supply centralized inputs.
FEDERATION FUNCTIONS

Presently Mother Diary and Nandini Milk Products at Bangalore are
under the control of KMF fair cattle feed plants, a central training Institute
and centralized testing and quality control laboratory are functioning under
the direct control by KMF Co-operation of activities between the unions and
developing marketing in the area if union. The federation manager surpluses
and deficiencies of liquid milk amongst the member milk unions. However
the federation organizes marketing of products. The major quality of the
milk is sold as liquid milk. This apart other products like butter, Ghee, SMP,
Peda flavored milk, Burfi, Panner, Khava, Jamoons, Mysorepak, Badam
powder and Ice cream are also sold. Nandini Good Life pure Cow Milk with
an ambient shelf life of 45 days has been introduced by adopting ultra high
temperature treatment technology. The products are sold under the family
brand name of Nandini. The federation organizes marketing of liquid milk
and products outside the state. Excellence in quality is maintained to lay a
solid foundation for widespread acceptance of Nandini Products. This will
ensure an assured market for the ever increasing milk production Balanced
cattle feed, by pass cattle feed. Mineral mixture frozen semen straws and
liquid nitrogen are produced by the federation and supplied to the unions.
Training and development senior management personnel, acquiring and
applying all new relevant technologies prescribing quality guidelines and
norms are also the functions of the federation.

MILE STONES
1955 - First Diary in Karnataka set up at Kudige, Kodagu
Dist.08.01.1955.
1965 - Biggest diary in Karnataka with 1.5 lakh liters per
Day liquid milk processing factory.
 Set up in Bangalore on 23.02.1981
 Expansion date 01.02.1981.
1974 - World Bank aided Karnataka Diary
Development project implemented 19.06.1974.
1974 - Karnataka Diary Development Corporation
(KDDC) is born .11.01.1974.
1975 - First spear head team is positioned 01.07.1975
1976 - First Registration of Union 23.11.1976
1980 - Karnataka Milk products Ltd. Established 01.3.1980
01.3.1980
1982 - First Milk product Diary started at Gejjalagere,
Monday 12.06.1982
1983 - Corporate brand name Nandini given 13.02.1983
a) First cattle feed plant commissioned at Rajanukunte
21.03.1983.

b) Capacity Expanded form 100 Mtr to 200 Mtr
01.06.1997.
1984 - Bull Mother form and frozen semen Bank
Commissioned 01.01.1984. Operation Flood II
Implemented 01.04.1984 to 30.09.1987.
Operations flood II Implemented 01.04.1984 to
30.09.1987.
Karnataka milk federation is born 01.05.1984 KDDC
transformed into KMF into KMF 01.05.1984 KMPL
assets transferred to KMF 01.02.1984 product Diary
Dharwad Commissioned 12.09.1984 Mother Diary
Started functioning 01.12.1984
1985 - Remaining government dairies transferred to KMF
14.02.1985.
1987 - Operation Flood- III implemented 01.04.1987
Dairies at Hassan, Tumkur and Mysore transferred to
district milk unions 01.06.1987.
1988 - Dairies at Bangalore Gejjalagere, Dharwad
Belgaum and Mangalore transferred to district milk union
01.09.1988 training centers at Mysore Dharwad Gulbarga
transferred to Unions 01.12.1988.

1989- Centralized marketing organized 01.05.1989 last milk
shed registered as a union (Raichur) 12.12.1989 milk
supplied to Kolkata Mother Dairy through railway
tankers from mother dairy, Bangalore 03.03.1989.
1991 - Karnataka Holstein Friesian Breeders Association
(KHAEBA) Registered 25.03.1991.
1992 - Commercial production and marketing of
NANDINI flavored milk launched September 1992.
1993 - Milk procurement on single day cross million Kg
Level in December 1986 and average milk procurement
per day for the year crosses million Kg level 1991-1992.
1994 - Liquid Milk sale crosses billion liters per day
February 1994.
1995 - Varieties of new Nandini Products Viz, Nandini
Panner, Burfi, Kava and sweet curds launched December
1995.
1996 - Foundation stone lay for cattle feed plant at
Hassan 09.02.1996 production stated 09.09.1998.
1996 - Foundation stone laid for mega Dairy and new
Powder plant at Bangalore, Mini Dairy schemes and
other development programmed 01.11.1996.

1997 - Inauguration of Ice Cream manufacturing unit at
Mother Dairy premises Bangalore 12.06.1997
1998 - Launching new products Jamoon Mix –March 1998.
1999 - Tetra Fino Packaged Nandini “Good Life Milk March.
2000 - Badam Powder -17.01.2000
• Besan laddoo Sept 2004

• Good life High fat milk Dec 2000
• Nandini Goodlife Slim May 2002
• Good life 200ml Tetrabrick July 2002
• Good life 1 ltr Tetra Brik July 2002
2000 - MOU agreement signing by GOK & NDDB for

implementation of Perspective Plan.
2000 - Chilling Centre of 150 TLPD capacity at Hosakote
started
in Bangalore Union.
2000 - “Mega Dairy” started functioning in Bangalore Union.
2001 - Starting of Sales Depot at M'lore in addition to Depos at
B'lore, Hubli & Thirupathi.
2002 - Adoption of “Mnemonic Symbol”
• In Bangalore, D.K. & Mysore

• in Shimoga & Dharwad
2002 - Release of 50gm. SMP in metalized Polypack.

2002 - Registration of KMF website as “www.kmfnandini.coop”.
2002 - ‘Nandini Shop on Wheels' started (Mobile display cum
sales vehicle).
2002 - Release of Urea Molasses Brick(3Kg Pack)
2002 - Powder plant of 30 MT capacity started at Mother Dairy.
2004 - MOU agreement signing by GOK & NDDB for
implementation of Perspective Plan 2010.
2005 - Laying of Foundation stone for 30 MTs Powder Plant at

Channarayapatna.
2005 - Launching of ‘Nandini Set Curd'.
2006 - Packing Station commissioned at Kumbalgodu (Mandya
Union).
2006- Depos opened at Kerala (Kannur & Ernakulam).
2006 - Foundation stone laid for New 300 MTs capacity at
Hassan & Inauguration of Existing CFP expansion from
100 MTs to 200 MTs.
2006-
• Expansion of Gubbi CFP from 100MTs to 150 MTs.
• Expansion of Dharwad CFP from 100 MTS to 150
MTs.
2006 - Release of new generation Drinks Tetra Pack variants of
Flavored milk & Buttermilk.
2007 - Release of Nandini Homogenized cow milk(3.5%Fat /
8.5%SNF) in Bangalore.
2007 - Opening of“Nandini Dairy Farmers Welfare Trust” hostel.
2007 - Launching of ”Bounce” brand milk at GOA.
2007 - Inauguration of additional Infrastructure facilities for UHT
milk production at Kolar from existing 40,000 LPD to
1.5LLPD.
2008 - Commissioning of Channarayapatna Product Plant at a total
cost of Rs. 72 Crores.
• Launch of New products & new stunning packs
(Sundae, Crazy Cone ice cream/Lite Skimmed Milk/
Cool Milcafe/Choco Milk Shake/Dairy Whitener)
• Launch of Goodlife Slim in 1Ltr Brik.
2009 - Gulbarga Dairy & Milk Marketing taking over by KMF
QUALITY POLICY OF MOTHER DAIRY
Every employee of Mother Diary will strive to provide milk and milk
products of outstanding quality with competitive rates, prompt delivery and total
customers satisfaction.

ISO 9002 AND HACCP IS 15000 (HACCP) CERTIFICATE
Mother Dairy has obtained ISO 9002 and HACCP Certificate from Bureau of
Indian Standard (BIS) of government of India form December 2000. Mother
Dairy is the first and only dairy to secure the comprehensive certificate in the
entire south India.
The importance of obtaining this certificate is to:
Procure Manufacture & distribute the products under controlled set of
procedures as per ISO 9003.
To identify a probable occurrence of Hazard as during the process of
procurement manufacturing and distribution.
To identify the severity of Hazards during critical control point.
To control the Identified Hazards and to produce the products of
International food produce the products of international food safety
standards.
PRODUCT LINE
The Principle aim of mother dairy is to satisfy people with different tastes
and preference and income as such it has a broad product line satisfy the people
of different taste.
Toned Milk
Full Cream Milk

Curd
Butter
Ghee
Ice-Cream
Nandini Milk Products profile
This unit has specialized production of milk based ethnic sweets like
Nandini toned milk
Nandini homogenized milk
Nandini full cream milk
Nandini milk products
Nandini curd
Nandini ghee
Nandini butter
Nandini paneer
Nandini Burfi
Nandini cheese
Nandini Mysore park
Nandini Peda
Nandini Burfi
Nandini Khova
Nandini Jamoon mix
Nandini Badam powder
Nandini Sugar free Peda
Nandini Bite
Nandini chocolate
Nandini Bulk cheddar cheese
Nandini Skimmed milk powder

1) Nandini Peda:-
Nandini Peda is a delicious treat for the family, made from pure
milk available in 250gms pack containing 10 pieces each.
Dharwad Peda Nandini Sugar Free Peda
2) Nandini Paneer:-
This is heated to a temperature of 65 degree centigrade for 30
minutes and maximum should be at 70%.
Diced Paneer
3) Nandini Burfi:-
The maximum moisture should be 13-14 % and acidity should be
0.35
Dry fruits burfi Coconut Burfi

5) Nandini milk powder: -

Enjoy the taste of pure milk skimmed milk powder from pure mik,
processed and packed hygienically.
Skimmed Milk Powder

4) Nandini mysorepark:-
Fresh and tasty, Nandini Mysore Park is made from high quality
Bengal gram, Nandini ghee and sugar cane. It’s delicious way to relish a
sweet moment.
Mysore Pak
5) Nandini Gulab Jamoon mix:-
Gulab Jamoon mix is made from skimmed powder, Maida, soji, and
anadini special grade ghee.
•
Khova Jamoon

COMPETITORS :
The success of each and every business unit is mainly depending on
how brilliantly it faces the competitions Mother dairy is not out of completion it
has 80% market share in Bangalore & Presently it is the brand leader for milk
products. The main competitors to Mother Dairy are:
Heritage
Arogya
Good Morning
Swastik
ORGANIZATIONAL OBJECTIVE AND STRATEGIES
The First step in an organization is the assessment of its objective and
strategies i.e., what business are we in? And at what level of quality do with wish
to provide or service? Where do we want to be in the future? It is only answering
there and other related questions that the organizational must assess the strengths
and weakness of its human resources.
NEEDS ASSESSMENT: Needs assessment diagnosis present problems and
future challenges to be meet through training and development organizations
spend vast sums of money (Usually as a percentage of turnover) on training and
development. Before committing such huge resource organization would do well
to assess the training needs of their employees organizational that implement

training programmers without conducting needs assessment may be malign
errors.
TRAINING AND DEVELOPMENT OBJECTIVES
Once training needs are assessed, training and development goals
must be established. Without clearly set goal, it is not possible to design a
training and development program and after it has been implemented, there
will be no way of measuring its effectiveness. Goals must be tangible
verifiable, and measurable. This is easy where skills training are involved
KMF Officers
SRI.A.S.PREMANATH - MANAGING DIRECTOR , KMF

Place of
Name Designation
working
A.S.PREMANATH DIRECTOR (ADMN) KMF CO
RAVIKUMAR KAKADE DIRECTOR (MKT) KMF CO
MUNIRAJU DIRECTOR (AH) KMF CO
C.NARASIMHA REDDY DIRECTOR (R&D) KMF CO
DR:M.N.VENKATARAM DIRECTOR (C.T.I) KMF CO

U
D.SRINATH ADNL DIR (MKT) KMF CO
SURESH G MUDDE
ADNL DIR (FIN) KMF CO
BIHAL
K.S.BHISE ADNL DIR KMF CO
Dr.BERNAD EARNEST (ADMIN/PUR) KMF CO
Dr.D.N.HEGDE ADNL DIR (FEEDS) KMF CO
ADNL DIR (AH)
B.NATRAJ ADNL DIR(Q.C) KMF CO
H.MUNAVAR JOINT DIR(RL 441),
KMF CO
AHMED,KCAS CO-OP AUDIT
UNION CHIEFS
DESIGNATIO PLACE OF
NAME
N WORKING
DR. V.LAXMAN BANGALORE MILK
.D
REDDY UNION
TUMKUR MILK
DR.K..SWAMY M.D
UNION
KOLAR-
K.L.GAJENDRAN M.D CHIKKABALLAPUR
A MILK UNION
BELGAUM MILK
P.D.HAMPALI M.D
UNION
HASSAN MILK
RANGANATH. B.P M.D
UNION
MANDYA MILK
DR.T.GURULINGAIAH M.D
UNION

MYSORE-
T.KUMARA SWAMY M.D
CHAMARAJNAGAR
CHANDRASHEKARA DAKSHINA
M.D
NAYAK KANNADA
RAICHUR-
DR. T. PRASANNA M.D
BELLARY-KOPPAL
DR.K.RAMACHANDR DHARWAD MILK
M.D
A BHAT UNION
BIJAPUR-
DR. SURESH BABU M.D
BHAGALKOT
SHIMOGA MILK
DR. G T GOPAL M.D
UNION
GULBARGA MILK
DR. H.N.SUDHAKAR M.D
UNION
UNIT CHIEFS
NAME DESIGNATIO N PLACE OF WORKING

MILK PRODUCT
PLANT,CHANNARAY
H.N.SUBBUSWAMY DIR
APATNA
K.V JAGANNATHA RAO DIR
MOTHER DAIRY
DR. R.MAHESH A.D
NANDINI SPERM
STATION
CATTLE FEED
Y.GOPAL G.M
PLANT, GUBBI
CATTLE FEED
MOHAMOHD ISMAIL G.M PLANT,
RAJANUKUNTE
CATTLE FEED
P.V.MOHAN KRISHNA G.M
PLANT, DHARWAD

CATTLE FEED
D.VIVEK G.M
PLANT, HASSAN
NANDINI MILK
SURESH KULKARNI G.M
PRODUCTS
V.RAJESHWAR GM POUCH FILM PLANT
TRAINING CENTRE,
K. MAHADEVAIAH J.D
MYSORE
TRAINING CENTRE,
P.S.BELLUNKI I/C J.D
DHARWAD
N.HANUMESH G.M GULBARGA DAIRY
Know Your Milk: -
 Importance of milk

 Milk is nature's ideal food for infants and growing children.The

importance of milk in our diet has been recognized since Vedic
times, and all modern research has only supported and
reinforced this view. In fact, milk is now considered not only
desirable but essential from the time the child is born. The
baby is recommended to be breast-fed until it is weaned and
thereafter given cow/buffalo/goat milk till he or she reaches 12
years of age.
 The National Institute of Nutrition has recommended a

minimum of 300 gms daily intake of milk for children between
1-3 years of age and 250 gms for those between 10-12 years.
 MILK DEFINITION AND ITS COMPOSITION
 Milk may be defined as the whole, fresh, clean, lacteal

secretion obtained by complete milking of one or more healthy
milk animals, excluding that obtained within 15 days before or
5 days after calving or such periods as may be necessary to
render the milk practically colostrum-free and containing the
minimum prescribed percentages of milk fat and milk-solids-
not-fat. In India, the term 'milk', when unqualified, refers to cow
or buffalo milk, or a combination thereof. Milk SNF means Milk
Solids-not-Fat, comprising protein, carbohydrates, vitamins,
minerals, etc in milk other than milk fat.

ESSENTIAL NUTRIENTS IN MILK
 Milk is almost an ideal food. It has high nutritive value. It

supplies body-building proteins, bone-forming minerals and
health-giving vitamins and furnishes energy-giving lactose and
milk fat. Besides supplying certain essential fatty acids, it
contains the above nutrients in an easily digestible and
assailable form. All these properties make milk an important
food for pregnant mothers, growing children, adolescents,
adults, invalids, convalescents and patients alike.
Milk is a powerful nutrition package containing nine essential

nutrients including calcium, protein and potassium. Milk is the
perfect beverage for today's kids and teens.
➢ Calcium:- Milk and dairy products are an important
source of calcium. Apart from bone health, Calcium also
plays vital role in blood clotting, nerve conduction, muscle
contraction, regulation of enzyme activity, cell membrane
function and blood pressure regulation.
➢ Protein:- Milk is a good source of low-cost high quality
protein, which is readily digested. This protein is important
for a number of bodily functions-vital to brain development
and the growth of body tissues.
➢ VitaminA:- Maintains normal vision and skin. Helps
regulate cell growth and integrity of the immune system.
➢ Vitamin B-12: -Essential for the growth and health of the
nervous system. Linked to normal activity of folic acid and
is involved in blood formation.

➢ VitaminD: -Promotes the absorption of calcium and

phosphorus, and influences bone mineralization, the
strengthening of bones.
➢ Potassium:- Regulates the body's fluid balance and
blood pressure. It is also needed for muscle activity and
contractions.
➢ Phosphorus:- Helps generate energy in the body's cells
and influences bone mineralization, the strengthening of
bones.
➢ Niacin:- Keeps enzymes functioning normally and helps
the body process sugars and fatty acids. It is also
important for the development of the nervous system.
➢ Riboflavin:- Helps produce energy in the body's cells and
plays a vital role in the development of the nervous
system.
CLASS AND TYPE OF MILK
 Dairies in India have to market milk by standardizing, as per

the various types of milk prescribed under Prevention of Food
Adulteration Act. These type of milk differ in their Milk fat and
Milk SNF contents.

 Raw milk procured from villages, contain numerous pathogenic

and spoilage bacteria. These microorganisms, if allowed to
grow, multiply at logarithmic rate and produce many toxins and
enzymes and spoil milk. Hence milk is processed by heat
treatment in dairies.
 Various types of heat-treatment given to milk are as below –
1. Pasteurization –
The term Pasteurization has been coined

 C or below. In this process, pathogenic and spoilage
organisms are destroyed. Normally pasteurized milk is packed
in sachets and shall be stored under refrigeration conditions,
so as to prevent the growth of remaining organisms in milk.
Pasteurized milk has a shelf life of 2 days when stored and
transported under refrigeration conditions. This milk is boiled
and consumed in Indian homes.°C for 15 seconds (or to any
temperature-time combination which is equally efficient), in
approved and properly operated equipment. After
pasteurization, the milk is immediately cooled to 6°after its

inventor, Louis Pasteur of France. Pasteurization refers to the

process of heating every particle of milk to at least 72
2. Sterilization -
C for minimum period of 15 minutes. After heating, sterilized

milk bottles are gradually cooled to room temperature. Due to
economic disadvantages and browning of milk, this process is
used only for bottled flavored milk. This Sterilized milk has a
shelf-life of not less than 3 months, even at room temperature,
and can be consumed directly.°Sterilized milk is manufactured
by filling into bottles and heating bottled milk to not less
than120
3. Ultra High Treatment (UHT) –

 C for 4 seconds and cooled instantly which retains all the

vitamins and nutritional value of milk providing zero bacteria
product which needs no boiling. The milk is packed in 6 layer
tamper proofed Tetra-pack packaging which prevents the milk
from spoilage due to sunlight, bacteria, germs and oxygen,
thus ensuring freshness and purity of milk packed. The milk
can be stored without refrigeration for 60 days in fino-
packaging and 120 days in brik packaging.°During the process
of UHT, milk is heat-treated to temperature of 137
 KMF has introduced four UHT milk variants in the market,

viz.,Nandini Good life
 (3.5% Fat, 8.5%
SNF), Nandini Full Cream Milk (12% Fat, 9%

SNF),
 Nandini Smart (1.5% Fat, 9% SNF) & Nandini slim (with less
than 0.5% fat and 9% SNF) catering to diverse groups of
consumers, including health conscious consumers.

4.Homogenization –
 Any of the above class and type of milk may be homogenized.

Homogenized milk is milk which has been treated in such a manner as to
ensure break-up of the fat globules in milk to such an extent that after
storage no visible cream separation occurs on the milk. Milk is
homogenized using a high-precision & expensive equipment known as
Homogenizer, which consists of a high pressure piston pump to force
milk at high pressures (and velocity) through a narrow opening between
the homogenizing valve and its seat; the fat globules in the milk are
thereby sub-divided into smaller particles of more uniform size. Cream
layer formation does not take place in homogenized milk.
 Milk pack, that is available in the market, contains printed details about
the type of heat-treatment that the milk contained in the pack has
undergone – Pasteurized / Sterilized / Ultra High Treated (UHT); the
class of milk as per PFA Act – Toned / Double Toned / Full Cream Milk /
Cow Milk / Buffalo Milk / Skim Milk; if any other processing –
Homogenized, etc. For instance, if Toned Milk is pasteurized and also
homogenized, it is designated as “Pasteurized Homogenized Toned Milk
CATTLE FEED PLANTS:

Cattle Feed being an important input to milk production is
manufactured in four plants viz Rajanukunte, Gubbi, Dharwad &
Hassan plants. Together they have production capacity of 700 tons
per day and produce feed in 3 varieties namely Bypass, Type I and
Type II along with Urea Molasses Brick (UMB). These plants are ISO
9001:2000 certified and has a combined capacity utilization of more
than 100%.Gubbi unit produces quality Mineral mixture and sells in 1
Kg retail packets to farmers at concessional rates.
Cattle Feed Plant, Rajanukunte, Gubbi, Dharwad and Hassan.

➢ The combined Production capacity of all 4 plants is 700MT

with capacity Utilization of more than 140%.
➢ All 4 Plants are ISO 9001:2000 certified.
➢ Three varieties of Feed along with Urea Molasses Brick at
Rajankunte & Mineral Mixture in Gubbi Plant are
produced.
NANDINI MILK – MILK FOR EVERY AGE GROUP
NANDINI Milk is available in a variety of forms that are differentiated by their milk
fat and other solids contents. Nutrition Facts on milk sachets can help you make
choices for your family. Nutrition facts provided is for 100 ml of milk.
Organization Chart

The organization is three tiered on Co-operative principles.

A. Dairy Co-operative Societies at grass root level.
B. District Co-operative Milk Unions at single / multi district level.
C. Milk Federation at State level.
All above three are governed by democratically elected board from among
the milk producers. Under the direction of elected boards, KMF, various
functional Units & Unions are performing the assigned tasks to ensure
fulfillment of organization objectives.
Human Resource Development

There are at present 20.35 Lakh dairy farmers as primary
members including 3.5 Lakhs of SC/ST and 6.6 Lakh woman
members.
Dairy Co-operatives employ more than 32000 people and
5200 are permanent KMF Units and Unions employees.
Indirect employment thro' veterinary services, milk
transportation, milk sales etc. activities is to the tune of
52000 people.
This sector has also created demand and employment in
manufacturers of equipments required by DCS, Dairies and
printing.
Quality and Food Safety

During the last ten years, the Federation is giving greater emphasis on
procuring quality milk from DCSs under the concept of “Quality Excellence
from Cow to Consumer.” Many Clean Milk Production (CMP) initiatives
have been implemented at all the stages of procurement, processing and
marketing. Among these CMP initiatives, noteworthy initiative is the setting
up of Community Milking Parlours in villages.
The KMF is forerunner to introduce this innovative technological initiative

for bringing about revolutionary improvement in quality of milk collected in
DCSs. This system has several advantages such as elimination of mastitis in
milch animals and improvement of productivity. The milk from milking
machines, collected through Automatic Computerized Milk Collection Units
is chilled directly in Bulk Milk Coolers. This chilled raw milk, untouched
and unadulterated by human hands, has very high microbiological quality,
comparable to international standards. This high quality milk is being
utilized for manufacturing high quality value added milk products, for both
domestic as well as international markets.
Other Clean Milk Production (CMP) Initiatives include: -
• Training of milk producers on modern dairy husbandry practices and CMP.
• Providing SS utensils, antiseptic solutions for udder cleaning on pre and
post milking, etc. to producers.
• Training to DCS staff and officers of the Unions on CMP.
• Replacing Aluminium milk cans and collection vessels with SS –304.
• Posters, documentary films and booklets on Clean Milk Production.
BANGALORE URBAN AND RURAL MILK PRODUCERS

DISTRICT CO-OPERATIVE SOCIETIES UNION LIMITED.

(Bamul - Bangalore Dairy)

The garden city turned into the silicon capital of India has
made rapid strides in dairy activity.
From 50,000 Liters a day 4 decades back under UNICEF,
today it is a 8 Lakh Liters/ Day, State-of- the- art plant
expandable to 10 Lakh Liters/ Day.
It covers 12 talukas with more than 1782 Societies
functioning.
Hoskote on the out skirts of the city boasts of a 1.5 LLPD
chilling plant, capacity comparable to many dairies in the
State. A new dairy of capacity 2LLPD is also being
commissioned here.
Specialty of the Union: Fully computerized Dairy with no
human handling of milk with the distinction of having highest
procurement and highest sale of milk by any dairy in
Karnataka.
MOTHER DAIRY, A UNIT OF KMF

Mother Dairy, Bangalore, a flagship dairy of KMF having
ISO22000:2005 Certification was set up during the year
1984, primarily for dispensing liquid milk to customers
through Bulk Vending system. Today, the Dairy stands
expanded from 2 Lakh Liters to 7 Lakh Liters milk processing
per day. Also, it has facilitates to pack and distribute milk &
curd in different packs formats in the most hygienic way.
Besides, it has a state of the art facility to manufacture Skim
Milk Powder, Dairy Whitener, as well as Whole Milk Powder to
the tune of 30 MTs per day. It has established a facility to
manufacture more than 20 varieties of Ice cream in the
various pack formats to the tune of 15000 Liters per day.
Presently, it is undertaking manufacturing and co-packing of
'Amul' brand of ice cream for GCMMF.
Mother Dairy has a network of 616 retailers through whom
milk is sold to the consumers. Further, it has satellite
modern format joints to sell various verities of milk and
'Nandini' brand of long shelf life and short shelf life milk
products numbering around 50. The sale joints are branded
as "Nandini Milk Shoppe". Also, cold chain network which is a
prerequisite for sale of milk and milk products has been

established in 4 strategic locations of Bangalore city as

"Walk in cold store" to ensure un-interrupted and constant
milk supply to our retailers/consumers.
• The Dairy is poised to add 4 more varieties of exotic ice
creams including pro-biotic, sugar free in the near
future and also would undertake manufacturing of
very improvised quality of Paneer, Yogurt as well as
flavored milk in bottles. Plans are also under way for
automated production of above milk products in the
immediate future. There is a plan drawn up for putting
in the market ready-to-eat foods "Retorted" and having
appreciable content of milk and milk products. The
same is planned to be introduced in the mid of 2010.
The exclusiveness of Mother Dairy is because of:

• Mother Dairy cares for quality, hygiene and food
safety and hence the dairy was certified for certified for
ISO 9001-2000 during the year 2000 and has
been certified for ISO 22000-2005 during 2008.
• The Dairy has Export License for Skimmed Milk
Powder, Whole Milk Powder, Dairy Whitener, Ghee
and Butter.
• The Dairy has embarked on Environmental Protection,
Energy Conservation Program me and have been
suitably recognized by Bureau of Energy Efficiency,
Government of India and KREDL, Karnataka.
• Time being the essence of working Mother Dairy has
brought the activities under LAN by adopting
appropriate technology.
• Any business enterprises assessed for its status on
the financial performance and Mother Dairy fully
believes in this philosophy and has constantly posted
positive financial results ever since its existence.
INTEGRATED BUSINESS PLAN:-

Preparation of Integrated Business Plan in consultation with the

Division Heads. Integrated Business Plan is prepared after taking into
consideration the various experience, growth demand and supply, export or
import policy of the Government, Government legislations on various
issues, statutory levies, geographical conditions – particularly because we
deal with agro based perishable commodity. Since the market is volatile and
also market conditions. Hence, preparation of Integrated Business Plan
meticulously is a very important task for the Federation.
Source of income :-
The main source of income for the Federation is as under:-

✔ Direct income on account of sale of milk and milk products at Mother
Dairy - one of the units of the Federation
✔ Conversion income at Mother Dairy i.e., if the surplus milk received
at Mother Dairy is being converted into Skim Milk powder, for which
specified amount is charged and hence the conversion amount.
✔ A certain amount of profit on sale of cattle feed by the Federation
earns 4% as service charges.
Costing:-
The Federation does not have a pre-determined costing system

because most of the time the fixation of selling price of milk depends on
various factors like competitor’s entry in to the market, their pricing of the
products, and interference from the Government etc. Because of these,
costing does not play a role in decision making; that is the reason the

member milk unions and Federation sometimes lose heavily on crude

method only to assist the Management in certain decision making.
Computerization:-
The Federation has computerized all its financial activities right from
generation of receipts, vouchers, invoicing, generation and submission of
information to the Management. The Federation has also succeeded in net
working of the finance sections so that the information flows easily and
speedily.
As regards Mother Dairy, the entire Dairy activities right from
reception of milk to the dispatch of milk has been totally computerized and
is working with oracle system. The Federation is planning to upgrade the
existing system to the present level or activities.
Distribution of Profits:-
The Finance Division after complying with the provisions of

Karnataka Co-operative Society’s Act and Byelaws of the Federation
submits all its proposals to the Board for distribution of dividend and bonus
to members on yearly basis. For the first time, the Federation has declared
dividend and bonus for the year 2001-2002 and is continuously doing from
then onwards. KMF gets financial assistance by itself through various
transactions and during extreme and contingencies it gets from National
Dairy Development Board (NDDB) for a period of 10 to 15 years. This
NDDB is located at Anand in Gujarat.

NANDINI HI TECH PRODUCT PLANT
10 Back ground:
The milk procurement by the co-operatives in Karnataka has steadily

increased over the years due to the efforts and policies favoring milk
production. Existing infrastructure of the milk co-operatives in the
state was found to be insufficient for handling the excess milk.
In order to meet the increased processing requirement, Karnataka
Milk Federation (KMF), in consultation with National Dairy
Development (NDDB), conceived to setup a product dairy of 400
TLPD with 30 MTPD powder plant in the year 2005. It was decided to
set up the plant at Channarayapatna, Hassan Dist (Karnataka), a
strategic location to handle the surplus milk of Hassan, Mandya,
Mysore and Tumkur milk unions.
The project was entrusted to NDDB on turnkey execution basis.
2. Salient features of the project:
Infrastructure:
• The project has been setup in a 22 Acres of land, beside national
high way NH-48 (Bangalore-Mangalore)
• Estimated cost of the project is Rs 6942.64 Lakh out of which 20%
is borne by KMF and remaining is loan from NDDB.
• State of the art automation technology (DCS / Scada) for milk
processing and powder manufacturing and energy efficient
equipment and machineries adhering to HACCP standard.
• Fully automated refrigeration plant using environment friendly
ammonia liquid over feed system with ICE silo.
• Milk storage facility : 600 KL
• Cream storage: 60 KL
• Butter storage: 580 MT
• Ghee storage: 150 MT
• Effluent treatment plant using environmental friendly
anaerobic technology.

3.0 Processing Capacity:
• Milk processing: 400 TLPD

• Milk powder Production: 30 MTPD
• Butter Production: 21 MTPD
• Ghee Production : 5 MTPD
4.0 New Project commissioned on 09.04.2011
• Installation of Nandini UHT Milk Processing and packing facility of

1,00,000 Ltrs/ Day Capacity.
• Includes facility for packing Nandini UHT milk in 500 ML, 200 ML
Fino and 200 ML Brick packs.
• Includes facility for packing Nandini Flavored Milk in 200 ML Packs.
• This Project is aimed to address ever growing Market demand of
Nandini UHT Milk.
Mc KINSEY’S MODEL WITH REFERENCE TO

KARNATAKA MILK FEDERATION
The Seven S framework first appeared in “The Art of Japanese

Management” by Richard Pascale and Anthony Athos in 1981. They had
been looking at how Japanese industry had seen so successful, at around the
same time that Tom peters and Robert Waterman were exploring what made
a company excellent. The seven S models were born at a meeting of the four
authors in 1978. It went on to appear in “In Search Of Excellence” by peters
and Waterman, and was taken up as a basic tool by the Global Management
consultancy McKinsey: it sometimes known as the McKinsey 7S Model.

McKinsey and Co’s 7S Framework provides a useful framework for

analyzing the strategic attributes of an organization. The McKinsey
consulting firm identified strategy as only one of the seven elements
exhibited by the best-managed companies.
1. SHARED VALUES (SUPER ORDINATE GOALS)

Shared Values or Super Ordinate Goals refer to the long term of an
organization. “Hard Minds” refer to the financial performance of an
organization. According to Pascale an enterprise that cannot generate a profit
is not adding enough value to perpetuate its right to exit, but when short-
term profits are over emphasis, a company’s long-term competitive position
can be sacrificed. Hard- minded values are tied to goals that are
unambiguous and quantifiable.
2. STRATEGY
Strategy is the Systematic action and allocation of resources to
achieve company aim. It also refers to the determination of the purpose and
the basic long-term objective of an enterprise and the adoption of course of
action and allocation of resources necessary to achieve these aims.
3. STRUCTURE
The structure of the organization is basically a network of authority
and responsibility, which has been assumed by and delegated to the
employees. Organizational structure defines the pattern of formal
relationship of superior and subordinate. It may be regarded as network or
role, relationship, assigned work and delegated authority of employees. It
provides the basis on which the managers and non-managerial employees
perform the job assigned to them.

4. STAFF
Staff mainly refers to the people in the organization or enterprise.
KMF views people or employees as valuable resources wherein they
carefully nurture, develop, guard, and allocate them, they believe in
transparency as the basis foundation for employing people.
5. STYLE
“Style refers to the way the management behaves and collectively
spends its time to achieve organizational goals or aims”.
KMF adopts various styles for the growth and welfare of the
organization like:-
6. SKILLS
Waterman Etal consider “skills” as one of the most crucial attributes
or capabilities of an organization. The term “skills” include those
characteristics, which most people use to describe a company.
Hindustan Lever is known for their marketing skills,
7. SYSTEM
A system in the 7S framework refers to all the rules, regulations and
procedures both formal and informal that complement the organization
structure.
KMF has its own system, rules and procedures to follow which help
the company to develop a talent pool with competence to take challenges of
present and future. The organization has its own information system,
manufacturing process and control process that aims to delight the customers
through good quality products, services and solutions.

CHAPTER 4

DATA ANALYSIS
AND
INTERPRETATION
ANALYSIS OF WORKING CAPTIAL IN KMF:-
The special factors that influence the Working Capital requirements of

the company are:-
✔ Availability of raw materials.

✔ Seasonal conditions.
✔ Procurement of milk.
✔ Animal Husbandry.
✔ Development activities.

SOURCES OF WORKING CAPITAL:-
The organization deals with National Dairy Development Corporation

for finance to the society. It approaches Finance Department and even
NDDC for meeting working capital requirements.
RATIOS FOR WORKING CAPITAL MANAGEMENT:-
1) Current asset to Total asset: This ratio establishes the relationship

between current asset and total asset of the organization. It is used to
determine the quantum of current asset in total asset.
Current asset to Total asset:- Current Asset

Total asset
2) Current Ratio: This is the most widely used ratio. It is the ratio of
current assets to current liabilities. It shows a firms ability to over its current
liabilities over current assets. It is calculated as follows:
Current Ratio: - Current Assets

Current Liabilities
3) Ratio of Inventory to Working Capital: In order to ascertain that

there is no over stocking, the ratio of inventory to working capital should be
calculated as follows:
Ratio of Inventory to Working Capital: - Inventory

Working Capital

4) Net Working Capital Turnover Ratio: This ratio shows the number
of times working capital is turned over in a stated period. The higher is the
ratio, the lower is the investment in working capital and greater are the
profits. However, a very high turnover of working capital is a sign of over
trading and may put the concern into financial difficulties. On the other
hand, a low working capital turnover ratio indicates that working capital is
not efficiently utilized. This ratio is calculated as follows:
Net Working Capital Ratio: Sales
Net Working Capital
5) Gross Working Capital Ratio: It is the ratio of Net Sales to Current Assets.
It determines increase in the current assets to sales. Increase of current assets
to sales means under utilization to current asset. Decrease of current asset to
sales means approximate utilization of current asset. It is calculated as
follows:
Gross Working Capital Ratio: Net sales

Current Assets
6) Asset Turnover Ratio: i) Current Asset Turnover Ratio

ii) Working Capital Turnover Ratio
These ratios measure the efficiency of a firm in managing and utilizing

its asset. The higher the turnover ratio, the more efficient is the management
and utilization of current assets or working capital, while low turnover ratio
are indicative of under utilization of available resources and presence of idle
capacity.

a) Current Assets Turnover Ratio: Cost of Goods Sold

Current Assets
b) Working Capital Turnover Ratio: Cost of Goods Sold

Net Working Capital
1) Operating Cycle: The cycle of conversion of cash into raw-materials into

work-in-progress, working-in-progress into finished goods, finished goods
into debtors and bills receivables, and debtors into cash again is called
Operating Cycle. The time involved in this cycle depends upon the length of
the cycle. The length of the cycle in turn determines Working capital
requirements. In case of manufacturing concern, the working capital
requirements are more because of the longer length of operating cycle. In
case of financial institutions, the length of the cycle is short therefore less
working capital requirements.
It is advantageous for the organization if the operating cycle is

small as the funds involved in the cycle are less. It is calculated as
follows:-
Operating Cycle: Inventory Period + Accounts Receivables Period.

TABLE 1: Showing the components of Net Working Capital for 3 years in

KMF
Particulars 2007-08 2008-09 2009-10

CURRENT ASSETS:-
Inventories 2041.52 1687.75 1375.97
Sundry Debtors 336.53 620.51 972.14
Cash & Bank 1637.40 2605.11 2719.05
Loans & Advances 8158.55 9916.12 9833.83
Total Current Assets 12174.00 14829.49 14901.00

CURRENT LIABILITIES & 9708.87 12660.83 12754.40
PROVISIONS:-
Total CL & PROVISIONS 9708.87 12660.83 12754.40
Net Working Capital 2465.13 2168.66 2146.60
(Rs. In Lakhs)

TABLE 2: Showing the composition of Current Assets to Total Assets for 3
Particulars 2007-08 2009-10

Current Assets 12174.00 14829.49 14901.00
Total Assets 17683.41 16084.48 19566.50
Percentage 68.84% 92.19% 76.15%
years (Rs. in Lakhs)
Interpretation:-
It is evident from the table that the composition of Current Asset to Total
Asset decreased from 2007-08 to there was a sudden increase in Current
Asset. It has recorded a highest of 92.19% in the year and a lowest of
68.84% in 2007-08.
TABLE 3: SHOWING THE CURRENT RATIO FOR 3 YEARS
Particulars 2007-08 2008-09 2009-10

Current Assets 12174.00 14829.49 14901.00
Current 9708.87 12660.83 12754.07
Liabilities
Ratio 1.253 1.171 1.168
(Rs. in Lakhs)
Interpretation:-

2:1 is considered as the standard for this ratio. From the table, it is
evident that in all 3 years the current ratio is far below the ideal level. The
company has recorded a highest ratio of 1.26:1 in 2007-08 and a lowest of
1.168:1 in 2009-10.
TABLE 4: Showing the net Working capital Turnover Ratio
Particulars 2007-08 2008-09 2009-10

Sales 172910.41 19085.00 23306.88
Net Working Capital 2465.13 2168.66 2146.60
NWC Turnover Ratio 7.01 8.80 10.85
(Rs. in Lakhs)
Interpretation:-
In the year 2007-08, the sale has increased by 8.38% when compared to
previous year, with decrease in net working capital by 37.43%, it represents
efficient use of net working capital in generating sales.
In the year , the sales has increased by 10.73% when compared to
previous year, with decrease in net working capital by 12.02%, it represents
efficient use of net working capital in generating sales.
In the year 2009-10, the sales have increases by 22.12% when compared to
previous year. It represents efficient use of NWC in generating sales.
TABLE 5: Showing the Gross Working Capital Ratio

(Rs. in Lakhs)

Particulars 2007-08 2008-09 2009-10

Current Assets 12174.00 14829.49 14901.00
Net Sales 17290.41 19085.00 23306.88
Ratio 1.42 1.28 1.56
Interpretation:-
In the year 2007-08, current assets are utilized efficiently to generate
sales. It is evident from that current assets have increases by 2.93% whereas
sales have been increased by 8.4%.
In the year, current assets have increased more than sales when
compared to previous year; this shows that current assets have been
underutilized.
In the year 2009-10, current assets are utilized efficiently to generate
sales. It is evident from the fact that current assets have increased by 0.48%
whereas sales have been increased by 22.12%.
Particulars 2007-08 2008-09 2009-10

Cost of Goods Sold 17204.42 18229.12 21526.23
Average Current Asset 12000.63 13051.76 14865.25
Ratio 1.433 1.396 1.448
TABLE 6: Showing Current Asset Turnover Ratio
(Rs. in Lakhs)
Interpretation:-
From the table we can come to know that, the company is maintaining a
steady level of current assets turnover ratio for the past 3 years i.e. around
1.5 times. It has recorded a highest of 1.44 in 2009-10 and a lowest of 1.39 .

TABLE 7: Showing Working Capital Turnover Ratio

(Rs. in Lakhs)
Particulars 2007-08 2008-09 2009-10

COGS 17204.42 18229.12 21526.23
Net Working cap 2405.13 2168.66 2146.60
Ratio 6.979 8.405 10.02
Interpretation:-
The company is showing a steady increase of working capital turnover
ratio i.e. in last three years. It recorded a lowest of 6.97 times in 2007-08 and
a highest of 10.02 times in 2009-10.
TABLE 8: Showing Operating Cycle

(Rs. in Lakhs)
Particulars 2007-08 2008-09

Inventory Period 1.187 1.227

Account Receivables 0.372 0.30

Period
Operating Cycle 1.559 1.527
Interpretation:-
The time to convert cash into cash by the company is around 45 days on
an average. The highest time taken to convert was 1.5 months in and lowest
being in the year 2006-07 i.e., 1.3 months.
ANALYSIS OF FINANCIAL STATEMENTS
1) Overall Profitability Ratio:- It is also known as ‘Return on

Investment’ (ROI) or ‘Return on Capital Employed’ (ROCE). It
indicates the percentage of return on the total capital employed in the
business. It is calculated by using the following formula:-
ROI= Net profit after taxes

Capital Employed
The term capital has been given different meanings by different

accountants. Some of the popular are as follows:-
✔ Sum total of all the assets whether fixed or current.

✔ Sum total of fixed assets.
✔ Sum total of long-term funds employed in the business i.e.,

Share Capital + Reserves and Surplus + Long-term Loans – (Non-

business Assets + Fictitious assets)
Calculation of Return On Investments for the year ending 31st March

2009
ROI = 747.60 *100 = 10.53%
7098.22
Interpretation:-
The organization is getting Rs. 10.53 for every Rs. 100 invested by it.
1) Gross Profit Ratio:- This ratio establishes relationship between gross
profit and net sales. Its formula is :-
Gross Profit Ratio:- Gross profit

--------------- *100
Net sales
This ratio shows the margin left after meeting the manufacturing
costs. It measures the efficiency of production as well as pricing. It also
helps in ascertaining whether the average percentage of mark up on the
goods is maintained.
However, the gross profits should be adequate to cover the operating

expenses and to provide for fixed charges, dividend and building up of
reserves.
Calculation of Gross Profit Ratio for the year March 2010

Gross Profit Ratio = 1780.64 * 100 = 7.63%

23306.88
Interpretation:-
15-20% is considered as the ideal for this ratio. The organization has
earned a gross return of 7.63%, which is far below the ideal ratio. Hence its
profitability position is very poor.
2) Net Profit Ratio:- This indicated the net margin earned on a sale of
rupees hundred. It is calculated as follows:-
Net Profit Ratio:- Net operating profit

-------------------------- * 100
Net sales
This ratio helps in determining the efficiency with which the affairs of
the business are being managed. In other words, it measures the overall
efficiency of production, administration, selling, financing, pricing and tax
management. An increase in the ratio over the previous period indicates
improvement in the operational efficiency of the business provided the gross
profit ration is constant. The ratio is thus an effective measure to check the
profitability of the business. However, constant increase in the above ratio
year after year is a definite indication of improving conditions of the
business.

A firm with high net profit can do better in the adverse conditions.
Similarly, a firm with high profit margin can make better use of favorable
conditions.
Calculation of Net Profit Ratio for the year March 2009
Net Profit Ratio = 679.54 * 100 = 2.91%
23306.88
Interpretation:-
5-10% is considered as the ideal for this ratio. The organization has
made a net return of 2.91%, which is below the ideal level. Hence, its
profitability position is not satisfactory.
3) Debt-Equity Ratio:- It is determined to ascertain the soundness of the
long-term financial position of the company. It is also known as
‘external-internal equity ratio’. It is calculated as follows:-
Total long-term debt Debt

----------------------------- Or ---------
Shareholders’ funds Equity
This ratio indicates the proportion between shareholders funds (i.e.

tangible net worth) and the long-term borrowed funds. The ratio may be
treated as ideal if it is 1. In other words, the investor may take debt-equity
ratio as quite satisfactory, if shareholders funds are equal to borrowed funds.
However, a lower ratio say 2/3rd borrowed funds and 1/3rd owned funds
might also not be considered as unsatisfactory because some businesses
needs heavy investment in fixed, assets, that has an assured return on its
investment like public utility concerns. The lower the debt-equity ratio, the
higher is the degree of protection enjoyed by the creditors.
It is to be noted that preference shares redeemable within a period of
12 years from the date of issue be taken as part of equity. The numerator of

the ratio consists of all types of debt i.e., both short-term as well as long-
term
Calculation of Debt Equity Ratio for the year March 2009

Debt = Long Term Loans
Equity = Share Capital + reserves + P&L A/c
Debt Equity Ratio = 3204.01 = .7082:1

4523.94
Interpretation:-
1:1 is considered as ideal for this ratio. The organization’s debt equity
ratio is below the standard level; hence its long-term solvency position is not
satisfactory.

CASH MANAGEMENT
Cash, the most liquid asset, is of vital importance to the daily

operations of business firms. Its efficient management is crucial for the
solvency generally referred to as “Life Blood of a business Enterprise”.
The term Cash includes coins, currency notes, cheques and drafts held
by a concern in its hands and balances in Bank Account. Cash also includes
near cash assets {i.e., those assets which can be immediately converted in to
cash, whenever the need arise}, such as time deposits kept by a concern with
Banks and Marketable securities.
Cash as an essential element is necessary for the beginning and ending

of the Working Capital Cycle.
Motives of holding Cash:-
The various motives or reasons for the holding of cash are every
business concern are as follows:-
1) Transaction Motive.
2) Precautionary Motive.
3) Speculative Motive.
4) Compensation Motive.
1. Transaction Motive:-

Every business concern keeps certain amount of cash to meet the

routine business payments. The need to satisfy this motive arises from the
lack of perfect synchronization between cash receipt and cash payments.
Cash for this purpose can be invested in meeting securities.
2. Precautionary Motive:-
The company maintains some cash to meet unexpected cash needs
arising out of unexpected contingencies, such as sharp rise in prices of Raw
Materials, unexpected delay in the collection of receivables, Strikes, Floods
and natural Calamities etc., Cash for this purpose can be invested in very
short term securities which love the ready liquidity.
3. Speculative Motives:-
The Company holds some cash balance mainly to take advantage of
and opportunity payment of cash, to take advantage cash discount available
for prompt payment of Bills etc.,
4. Compensation Motive:-
Cash management means that the cash held by a concern is neither
excessive nor inadequate but is sufficient for meeting its requirements.
In short, it means planning and control of cash. Cash management is

the most important area of Working Capital Management. Proper care and
attention will be taken in to consideration while managing the cash affairs.
Objective of Cash Management:-
Cash management has certain basic objectives. They are:-

1. To meet the cash payments as per the payment schedule.

2. To minimize the amount locked up as cash balance.
ANALYSIS OF CASH MANAGEMENT IN KMF
The organization forecasts inflow and outflow of cash through cash

budget and Cash flow statements. It is included in the annual integrated
business plan comprising physical activities on monthly basis and
corresponding financial activities, monthly cash is also drawn.
The cash budget and cash flow statement is monthly reviewed and is
submitted by the P&L a/c to the board with variance reports of plan and
actual. The extent of variation between actual and budgeted cash flows
planned every month depends on market situations and in case of bulk milk.
Daily sales and purchases are the factors that cause such variations.
RATIOS FOR CASH MANAGEMENT:-
1) Liquid or Acid test or Quick ratio: This is the ratio of liquid assets
to liquid liabilities with its most liquid assets. 1:1 is considered as
ideal ratio for a concern because it is wise to keep the liquid assets at
least equal to liquid liabilities at all times. Liquid assets are those asset
that are readily converted into cash and will include cash balances,
bills receivables, sundry debtors and short-term investments.
Inventories and prepaid expenses are not included in liquid assets
because the emphasis is on the ready availability of cash in case not
included in liquid assets because the emphasis is on the ready

availability of cash in case of liquid assets. Liquid liabilities include

all items of current liabilities except bank overdraft.
This ratio is the ‘acid test’ of a concern’s financial soundness.
It is calculated as under:-
Liquid Ratio: Liquid Assets

Current or Liquid Liabilities
2) Absolute Liquid Ratio: Though receivables are generally more

liquid than inventories, there may be debts having doubt regarding
their stability in time. So to get an idea about the absolute liquidity of
a concern, both receivables and inventories are excluded from current
assets and only absolute liquid assets, cash in hand, cash at bank and
readily realizable securities are taken into consideration.
It is calculated as follows:
Absolute Liquid Ratio:-
Cash in hand\bank + short term marketable securities
Current Liabilities
The desirable norm of this ratio is 1:2
3) Liquid asset Working Capital: This ratio establishes the relationship
between liquid asset and current asset of the organization. It is used to
determine the quantum of liquid asset that is constituted in current
asset.
Liquid asset to Working Capital: Liquid Asset

Working Capital

4) Cash/Bank To Current Assets: This ratio shows the percentage of

cash and bank balance to current assets. The cash and bank balance is
important for meeting working capital. Cash and Bank balance to
current assets ratio indicates what amount of cash is locked in current
assets.
Cash/Bank to Current Assets:- Cash/Bank

Current Assets
5) Cash Turnover Ratio: It is a ratio between cash and cost of goods

sold or net sales. This ratio indicates the extent to which cash
resources are efficiently utilized by the organization.
Cash Turnover Ratio: Cost of Goods Sold

Cash
TABLE 1: Showing Liquid or Acid Ratio
Particulars 2007-08 2008-09 2009-10

Liquid Assets 10132.49 13141.25 13525.03
Current 97058.89 12660.83 12754.40
Liabilities
Liquid Ratio 1.043 1.037 1.060
(Rs. in Lakhs)
Interpretation:-

The standard for liquid ratio is considered to be 1:1. In all the years
i.e., in between 2007 and 2009, the company has managed to maintain its
liquid ratio above the standard level, where is recorded a highest ratio of
1.060:1 in 2009-10 and a lowest of 1.037:1 in 2007., a very low ratio is also
not considered as wise because it is going to affect the day-to-day activities
of the company.
TABLE 2: Showing Absolute Liquidity Ratio
Particulars 2007-08 2008-09 2009-10

Super-Quick 1637.40 2605.11 2719.05
Assets
Current 9708.87 12660.83 12754.40

Liabilities
Ratio 0.168 0.205 0.213
(Rs. in Lakhs)
Interpretation:-
The organization is maintaining a stable level of cash of 0.20 paisa,
for each rupee of current liability obligation. Even then it is far below the
standard ratio i.e., 1:2. It has recorded a highest ratio of 0.213 in 2009-10
and lowest of 0.168 in 2007-08.
TABLE 3: Showing Liquid Assets to Working Capital for 3 years

(Rs. in Lakhs)

Particulars 2007-08 2008-09 2009-10

Liquid Assets 10132.49 13141.75 13525.03
Working Capital 12174.00 14829.49 14901.00
Ratio 0.8323 0.8861 0.9076
Interpretation:-
The purpose of this table is to know the amount of liquid asset
constituting the total current asset and thereby knowing the efficiency of the
organization to convert current asset quickly without loosing tits value. It
recorded a highest of 83% in the year 2007-08. As the company is
monitoring a very high percentage of current assets, we can say that its
ability to convert current asset to cash is high and it’s a good sign.
TABLE 4: Showing Cash/Bank to Current Asset Ratio.
Particulars 2007-08 2008-09 2009-10

Cash/Bank 637.40 2605.11 2719.05
Current Asset 12174.00 14829.49 14901.00
Percentage 13.44% 17.56% 18.24%
(Rs. in Lakhs)
Interpretation:-
The Company as a policy of maintaining cash position at 15% to 20%
of current assets. As in all the years, it is maintaining cash position in and
around the ideal level. We can say that organization if following effective
cash management policy.

TABLE 5: Showing Cash Turnover Ratio

(Rs. in Lakhs)
Particulars 2007-08 2008-09 2009-10

cost of Goods 17204.42 18229.12 21526.23
Sold
Cash 1637.40 2605.11 2719.05
Ratio 10.50 6.99 7.91
Interpretation:-
The cash turnover ratio has decreased in to 6.99 when compared to
precious years 10.50. In the year 2007-08, it has shown a drastic increase to
10.50.

CHAPTER 5
FINDINGS,
SUGGESTIONS and
CONCLUSIONS

FINDINGS:-
➢ The company is maintaining a very high proportion of current assets

in total assets i.e. around 75%. In the year 2008-09, it was 92.19%
➢ As the company’s current ratio is far below the standard level, it is
concluded that its short-term solvency position is very poor.
➢ As the company’s net working capital turnover is quite high, it is
concluded that there is an efficient use of NWC to generate sales.
➢ In the year 2009-10, the current assets are utilized efficiently to
generate sales.
➢ As the company is maintaining a high working capital turnover ratio,
it is concluded that working capital/current assets are managed and
utilized more efficiently.
➢ The liquidity of the organization is quite well since the organization is
maintaining Liquid ratio more than the ideal standard i.e. 1:1
➢ Cash turnover ratio is showing a mixed trend. In the year 2009-10 the
cash reserve was efficiently utilized when compared to 2008-09
➢ As the debtors are collected from time to time, we can say that the
company has sound collection policy.
➢ In the year 2009-10, the stock is converted 1.05 times into sales,
which is far above the ideal level.

SUGGESTIONS:-
➢ The company’s absolute liquidity ratio in all the years is far below the
ideal level. So the firm should take steps to invest more in super quick
assets.
➢ The company should take some measure to reduce manufacturing /
operating expenses so as to increase Gross Profit Margin which in
turn increases Net Profit Margin.
➢ Company should take steps to increase current assets, as the position
of worse in all the years, which will improve the short-term solvency
position.
CONCLUSIONS:-

The Mother dairy financial performance and working capital is

good. As comparing last three years of balance sheet it is found that the
profit is increased but the in the year 2007-08 it has increased due to many
reasons and then the next year the profit is again increased. The overall
financial and working capital position of Mother dairy is satisfactory but at
the same time to make substantial growth the company has to utilize its full
potential pertained to liquidity enhancement.
Mother Dairy is operating in Karnataka successfully from many

years. They supply milk and other products in Karnataka. The financial
position and its performance are sound.

ANNEXTURE
BALANCE SHEET AS ON 31.03.2009
PARTICULARS SCH NO As On 31.03.2010 As On 31.03.2009

Sources Of Funds
Share Capital 1 56292000.00 52430000.00
Reserves & Surplus 2 328147776.02 146468548.37

Deposit from GOI/GOK 33686971.87 33686971.87

Magazine Fund 3 2633476.73 2601856.73
Profit & Loss Account 67954712.07 234589545.80
Loans
Secured Loans 4.1 215854197.40 244341354.08
Unsecured Loans 4.2 104546855.52 104546853.52
TOTAL 809115987.61 818665130.37

Application Of Funds
Fixed Assets 5 521900250.25 529244015.86
Investments 6 72555700.00 72553450.00
Current Assets
Loans & Advances
Cash & Bank Balance 7 271905861.16 260511530.09
Sundry Debtors 8 97214526.79 6205612.77
Inventory 9 137597140.37 168775053.39
Loans & Advances 10 983383275.42 991612674.75
TOTAL 1490100803.74 1482950871.00

Less: Current Liabilities & 11 1275440766.38 1266083206.49
Provisions
Net Current Assets 214660037.36 216867664.51
TOTAL 809115987.61 818665130.37
PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31.03.2009
PARTICULARS SCH NO As On 31.03.2010 As On 31.03.2009

Expenditure
Salaries Wages & other 16 3220686.67 36545710.99

Benefits

Administrative Expenses 20 57596279.01 36106665.01

Rent, Rates,Taxes,Licence 21 46927596.85 9413998.44
& Insurance
Selling & Distribution 22 35553184.99 41797593.14
Interest & Bank Charges 23 35779630.76 1741550.33
Repairs & Maintenance of
Vehicles
Depreciation 25 35134637.20 37348862.04
Net profit transferred to 67954712.07 74760323.97
Appropriation a/c
TOTAL 312986463.04 269815349.32

Income
Gross Profit 178064883.47 85587818.70

Other Income 26 122916079.54 175462119.23
Int on Deposits & Advances 27 12005500.03 8765411.39
TOTAL 312986463.04 269815349.32
PROFIT & LOSS APPROPRIATION ACCOUNT
DEBIT
Reserve Fund 104488743.89
Building Fund 20164875.00
Bad Dept Fund 2419784.91
Co-op Propaganda Fund 5646165.00

Employee Benevolent Fund 8065950.00

Research & Development 12098926.00
Fund
Trade Fluctuation Fund 25042687.00
Co-op Education Fund 787936.00
Bonus to Milk Unions 52428678.00
Dividend to Milk Unions 3445800.00
Profit Tfd To Balance Sheet 67954712.07 234589545.80
TOTAL 302544257.87 234589545.80

CREDIT
Opening Balance of P&L 234589545.80 159829221.83
Account
Profit Tfd from P&L 67954712.07 74760323.97
Account
TOTAL 302544257.87 234589545.80
KARNATAKA MILK FEDERATION LIMITED

MANUFACTURING & TRADING ACCOUNT FOR THE YEAR
ENDED 31.3.2010
PARTICULARS SDHEDULE As on 31.03.2010 As on 31.32009

NO

Expenditure
Opening Stock 12 168775053.39 204147815.09

Purchases 13 2015762855.73 1682906815.21
Procurement Transportation
Charges
Inter Unit Transfers 14 123255420.42 177351320.65
Processing & Manufacturing 15 109036989.29 87948137.66
Expenses
Salaries Wages & Other 16 128827450.69 146182843.97
Benefits (80%)
Gross Profit Carried to P/L 178064883.47 85587818.70
Account
TOTAL 2733423720.94 2394118475.37
Income
Sales 17 2330688398.13 1908500136.18

Inter Unit Transfers 18 265138182.44 316843285.80
Closing Stock 19 137597140.37 168775053.39
TOTAL 2733423720.94 2394118475.37
MILK PRODUCTS: -
Milk
Pasteurized Toned Milk
Shubham Milk

Nandini Double Toned Milk Homogenized Cow's Pure

Milk
Good life Milk Good life Slim Milk
Sampoorna Standardized Milk Smart Double Toned Milk
Good life UHT Long Life Milk

Curds & other fermented products

Yoghurt Curd
Butter Milk Premium Curd Large
Set Curd Sweet Lassi
Milk powder
Dairy Whitener Skimmed Milk
Powder

Badam-Powder
Ghee & butter
Ghee in Standy Pouches Butter Salted & Unsalted
Ghee In Bag Ghee in Pet Jar
Ghee in Sachet

Ice cream & Frozen Desserts

Crazy Cone Ice Cream Butter Scotch Chocolate Nandini
Magic Strawberry
Pista Kulfi Chocó bar
Ice Cream Delightfully Tasty Anjir Ice Cream Delightfully Tasty

Chocolate
Ice Cream Delightfully Tasty Vanilla and Strawberry

Ice Cream Delightfully Tasty Kaju Draksh

Ice Cream Delightfully Tasty Mango Ice Cream

Delightfully Tasty Kesar Pista
Ice Cream Delightfully Tasty Black Currant Nandini Sugar Free

Pro Biotic Frozen Food
Ice Cream Delightfully Tasty Butter Scotch Ice Cream

Delightfully Tasty Pineapple
Dolly Stick Ice Cream Raspberry & Orange Ice Candy

Mango

Sundae Ice Cream Strawberry Sundae Icre Cream Butter Scotch
Ball Ice Cream Vanilla Strawberry
Milk Sweets
Mysore Pak Gulab Jamoon
Khova Jamoons Dry Fruits Burfi

Rossagolla Assorted sweets gift box
Nandini Bite Premium Badam burfi
Premium Besan Ladoo Premium Cashew Burfi
Pure Milk Elachi and Kesar Peda Pure Milk Peda
Other Products

Nandini Cream Cheddar Cheese
Nandini Sugar Free Peda Dharwad Peda
Flavoured Milk Pista Mango Strwaberry Flavoured Milk

Coolchoco Milk Shake
Flavoured Milks Gulab Jamoon Mix
Khova Kunda

Paneer

CHAPTER 8
BIBLOGRAPHY

BIBLOGRAPHY
SL NO NAME OF THE AUTHORS PUBLICATIONS

BOOK NAME
1 FINANCIAL Gupta Sharma Kalyani publishers
MANAGEMENT
2 Management M.N Arora Himalaya
accounting publishing house
3 Financial B.S Raman United publishers
management
Annual Report of KMF Ltd
WEBSITES:-
www.kmfnandini.coop
www.diaryindustries.com
www.googlesearch.com


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A Study on Working Capital Management at KMF

Karnataka Milk Federation (KMF) is the apex body in Karnataka

The Corporate Exposure and Learning (CEL) conducted at Karnataka

Part A consists of a general study relating to the organization. It

Part B consists of a detailed study on the Working Capital

Lal Bahadur Shastri Govt First Grade College, Bangalore 1

Lal Bahadur Shastri Govt First Grade College, Bangalore 2

Finance if the life blood of a business. The Financial Management

✔ Arrangement of short term and long term funds from financial

With the increase in complexity of modern business situation, the role of a

INTRODUCTION TO WORKING CAPITAL

Lal Bahadur Shastri Govt First Grade College, Bangalore 3

Working capital management is a significant in financial management

MEANING OF WORKING CAPITAL:

Lal Bahadur Shastri Govt First Grade College, Bangalore 4

Lal Bahadur Shastri Govt First Grade College, Bangalore 5

Working capital is also known as circulating capital, fluctuating capital and

OPERATIONAL DEFINITIONS OF THE CONCEPTS:-

Working capital may be regarded as that portion of a firm’s total

CLASSIFICATION OF WORKING CAPITAL:-

Gross Working Capital:

Net Working Capital:

Negative Working Capital:-

Lal Bahadur Shastri Govt First Grade College, Bangalore 6

Permanent Working Capital:

Temporary Working Capital:

Lal Bahadur Shastri Govt First Grade College, Bangalore 7

Current Liabilities are those claims of outsiders, which are expected to

Cost of Goods Sold:

OBJECTIVES OF WORKING CAPITAL:

✔ By optimizing the investment in current assets and by reducing the

Lal Bahadur Shastri Govt First Grade College, Bangalore 8

✔ The second important objective of working capital management is that

TOOLS AND TECHNIQUES OF WORKING CAPIRAL ANALYSIS:-

Working Capital management

Lal Bahadur Shastri Govt First Grade College, Bangalore 9

Karnataka Milk Federation – a harbinger of rural prosperity

“Quality Excellence from Cow to Consumer” – is the motto of the

Karnataka Cooperative Milk Producers' Federation Limited (KMF) is the

Lal Bahadur Shastri Govt First Grade College, Bangalore 10

THE GROWTH PROCESS

Lal Bahadur Shastri Govt First Grade College, Bangalore 11

World Bank Study - Observations

PERSPECTIVE PLAN 2010

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After the closure of OF-III project. Government of Karnataka and NDDB

GOI PROJECT - RKVY (Rashtriya Krushi Vikas Yojane)

Lal Bahadur Shastri Govt First Grade College, Bangalore 13

Other GOK Financial Support:

Lal Bahadur Shastri Govt First Grade College, Bangalore 14

Lal Bahadur Shastri Govt First Grade College, Bangalore 15

Indian Agriculture is an economic symbiosis of crop and cattle

Lal Bahadur Shastri Govt First Grade College, Bangalore 16

By looking into the progress in dairy sector, there are some

✔ World’s Number One Producer: - In 1995, the United States was

✔ Values of Dairy Output:- The value of output from dairying based

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