AProject Report on

A Project Report is submitted to Bhadrak Auto. College, Bhadrak in

partial fulfillment of Master Degree

Guided by: Submitted by

Dr Ramesh Chandra Das Pratap Kumar Sahoo
+3 3rd Yr Commerce
Roll No: BC17263
Exam Roll No-8117B234

1
 ACKNOWLEDGEMENT
I would like to express my special thanks of gratitude to my
teacher Dr Ramesh Chandra Das as well as our principal who
gave me
to golden opportunity to do this wonder project on the topic
Working Capital Management of Textile
Industries
, which also help me in doing a lot of Research and I came to
know about so many possessions. I am really gratified to them.

Secondly, I would also like to thanks to my parents and

Lecturer who helped me a lot in finalizing this project
Within a limited time frame.

Date: Signature:

2
 SELF CERTIFICATE
I hereby certified that the project work entitled:
“Working Capital Management of Textile Industries
”,
Submitted to the “+3 3RD YR Commerce Is a record of an
original work done
By me under the able guidance of “Prof. Dr Ramesh Chandra
Das ”, and this project is submitted in the fractional
implementation of constraint .

Pratap Kumar Sahoo

3
 GUIDE­CERTIFICATE
This is certify that Pratap Kumar Sahoo of “+3 3RD YR
Commerce bearing RollNo: BC17263
Exam Roll No- 8117B234,
has done this project under me.
He has taken suitable care and shown utmost truthfully
in performance this project.

I certify that this project is original in nature, has not

Copied from anywhere and is up to my anticipation and as per the
guidelines.

Date:
Place: Guider
Prof. Dr Ramesh Chandra Das

4
 Chapter 1

INTRODUCTION

Industry overview
The Textile Sector in India ranks next to Agriculture. Textile is one of
India’s oldest industries and has a formidable presence in the national
economy. The textile industry occupies a unique place in our country. It is the
second largest employment generator after agriculture.

Textile Industry is one of the leading textile industries in the world. Though
was predominantly unorganized industry even a few years back, but the
scenario started changing after the economic liberalization of Indian
economy in 1991. The opening up of economy gave the much-needed
thrust to the Indian textile industry, which has now successfully become
one of the largest in the world.
India textile industry largely depends upon the textile manufacturing and
export. It also plays a major role in the economy of the country. India earns
about 27% of its total foreign exchange through textile exports. Further, the
textile industry of India also contributes nearly 14% of the total industrial
production of the country. It also contributes around 3% to the GDP of
the country. India textile industry is also the largest in the country in terms of
employment generation. It not only generates jobs in its own industry, but
also opens up scopes for the other ancillary sectors. India textile industry
currently generates employment to more than 35 million people. It is also
estimated that, the industry will generate 12 million new jobs by the year
2014.
Indian textile industry can be divided into several segments, some of which can
be listed as below:
• Cotton Textiles
• Silk Textiles
• Woollen Textiles

5
• Readymade Garments

• Hand-crafted Textiles

• Jute and Coir

Textile Industry is providing one of the most basic needs of people and the holds importance;
maintaining sustained growth for improving quality of life. It has a unique position as a self-
reliant industry, from the production of raw materials to the delivery of finished products,
with substantial value-addition at each stage of processing; it is a major contribution to the
country's economy.

Company profile

The DCM group of companies is one of the major business pairs in the Indian business
scenario. The DCM group was founded by Late Lala Shri Ram in the year 1889 with the
establishment of Delhi Cloth Mill (DCM) which specialized in Textiles. The name of the
company was changed in 1994 to Delhi Commerce and Manufacturing Company (DCM) to
reflect the group’s diverse business activities covering the areas of:

 Information Technology

 Engineering product

 Cotton yarn

 International Trade

 Real Estate

D.C.M. GROUP AT A GLANCE

Company name Products/activities

DCM Real estate Real Estate

DCM Data systems Information Technology

DCM Textiles Cotton yarn

6
History:-
DCM Textiles, a unit of DCM Ltd. started its production in 1991. A part of Rs. 600 crore
DCM group Ltd. is headed by Dr. Vinay Bharat Ram, Chairman and Managing Director, a
famous Industrialist and an eminent Scholar of India. The DCM group consists of a large
number of Companies reputed for their products quality, dynamism, and business integrity
and for quick response to change in environment. DCM Ltd. is a diversified company having
interest in Textiles, Data System Tools and Dies and Real Estate & Infrastructure and other
International Businesses.
DCM Textiles is a Spinning Mill Located in Hisar (Haryana) engaged in the manufacturing
of 100% grey cotton yarn & mélange yarn in the count range of 12s to 40s, mainly for
knitting use. The raw material used by DCM textile is cotton. Cotton can be purchased from
various states like Haryana, Punjab, Rajasthan, Gujarat, M.P., Maharashtra and A.P. The
unit has a line of new generation machines having a capability of producing good quality
yarn. The machines are from various renowned manufactures. The modernization drives it to
further enhance the competitive edge of the unit by importing Cards, Auto corner, TFO and
installing new ring frames of LMW.
To meet the stringent quality requirements, the unit has testing laboratory well equipped with
sophisticated instruments like Uster Tester (UT-3 Model) and has also implemented the
quality systemic line with the Internationa l standards.

The unit is supplying to Indian as well as to international market and is in process of further
expansion of its international markets.

GROUP PHILOSOPHY:-
DCM group corporate philosophy revolves around 3 pillars:

 Business Integrity & Ethics

 Global Quality Standards

 Continuous Improvement and Value Additions

DCM has set bench marks in business integrity and come to top the list of 'Honoured
Business Houses which is acknowledged not only by its customers and suppliers but also by
its competitors. The group is determined to maintain highest standards of corporate ethics
which have been maintained, preserved and nurtured throughout the last over 100 years
yielding immense benefits. DCM has always striven for world class quality. Our 100% cotton
carded and combed yarns are exported across the globe in premium segment

DCM Textiles has firm commitment to the philosophy of continuous improvement. The
company led the industry by getting ISO 9001 certification for yarn operations in textiles in
7
the year 1995. The company is also in the process of implementing TQM practices and
successfully implemented a few quality initiatives which have given rich dividends terms of
improvement in quality and cost reduction

QUALITY POLICLY:-
DCM Textiles is committed to deliver goods and services which satisfy its customers at all
times and enhance value of its business for all the stake holders through active involvement
of all the employees and continuous process improvements

Chapter-2
Research Methodology
Introduction of project:-
Every organization irrespective of the size is required two types of financial assistance. One
is long-term funds which are required primarily to acquire basic infrastructure for the
company to create production facilities through purchase of fixed assets such as plant &
machinery, land, building, furniture, etc. Investments in these assets represent that part of
firm’s capital which is blocked on permanent or fixed basis and is cal ed fixed capital.
Funds are also needed for short-term purposes for the purchase of raw material, payment of
wages and other day – to- day operations. These funds are known as working capital.
In simple words, working capital refers to that part of the firm’s capital which is required for
financing short- term or current assets such as cash, marketable securities, debtors &
inventories. Funds, thus, invested in current assets keep revolving fast and are being
constantly converted in to cash and these cash flows out again in exchange for other current
assets. Hence, it is also known as revolving or circulating capital or short term capital.
In today’s competitive environment one of the primary goals of the financial management is
effective utilization of available funds.
The project assigned to me during my summer training in account & finance department is
“The working capital management.

Scope of the study:-

The scope of the study is identified after and during the study is conducted. The main scope
of the study was to put into practical the theoretical aspect of the study into real life work
experience. The study of working capital is based on tools like Ratio Analysis, Statement of
changes in working capital. Further the study is based on last 5 years Annual Reports of
DCM Textile Ltd.

8
 OBJECTIVES OF THE STUDY:-

 To study the sources and uses of the working capital.

 To study the liquidity position through various working capital related ratios.

 To study the working capital components such as receivables accounts,

Cash management, Inventory management.
 To make suggestions based on the finding of the study.

RESEARCH METHDOLOGY:-

INTRODUCTION:

Research methodology is a way to systematically solve the research problem. It May be

understood as a science of studying now research is done systematically. In that various steps,
those are generally adopted by a researcher in studying his problem along with the logic
behind them.

“The procedures by which researcher go about their work of describing, explaining and
predicting phenomenon are called methodology”.

TYPE OF RESEARCH:-

This project “A Study on Working Capital Management of DCM Textile Ltd” is

considered as an analytical research.
Analytical Research is defined as the research in which, researcher has to use facts or
information already available, and analyze these to make a critical evaluation of the facts,
figures, data or material.

SOURCE OF RESEARCH DATA

There are mainly two through which the data required for the research is collected.

PRIMARY DATA:-

The primary data is that data which is collected fresh or first hand, and for first time which is
original in nature.
In this study the Primary data has been collected from Personal Interaction with Branch
manager i.e., Mr. Sushil Gupta. and other staff members.

SECONDARY DATA:-

The secondary data are those which have already collected and stored. Secondary data easily
get those secondary data from records, annual reports of the company etc. It will save the
time, money and efforts to collect the data.
The major source of data for this project was collected through annual reports, profit and loss
account of 5 year period from 2011-2015 & some more information collected from internet
and text sources.

SAMPLING DESIGN:-

Sampling unit : Financial Statements.

Sampling Size : Last five years financial statements.

Tool Used for calculations: - MS-Excel.

TOOLS USED FOR ANALYSIS OF DATA:-

The data were analyzed using the following financial tools. They are
 Ratio analysis.

 Statement of changes in working capital.

LIMITATIONS OF THE STUDY:-

 The study duration (summer in plant) is short.

 The analysis is limited to just five years of data study (from year 2011 to year 2015)
for financial analysis.
 Limited interaction with the concerned heads due to their busy schedule

 The findings of the study are based on the information retrieved by the selected unit.

PRODUCTION PROCESS FLOW:-

It is the production unit of the organization and its main function is to convert cotton i.e. raw
material in to yarn. It is grey coloured yarn produced for both domestic as well as export
purpose through judicious selection of the raw material. Following is the step-wise process
followed for the production.
 PRODUCTION PROCESS FLOW
Raw material

Blow room

Carding

Combing

Draw frame

Speed frame

Ring frame

Cone winding Cone winding

Ch. Winding

TFO
Auto corner

Doubling

Cone winding

16
Packing
 Chapter-3

Working capital Management

INTRODUCTION:-

Capital is the keynote of economic development. In this modern age, the level of economic
development is determined by the proportion of capital available.

Meaning of Capital:-

In the ordinary sense of the word Capital means initial investment invested by businessman
or owner at the time of commencing the business.

Capital (economics), a factor of production that is not wanted for itself but for its ability to
help in producing other goods.

Definition:-

Capital is a factor of production with a specific, changeable value attached to it that could,
potentially, provide its owner with more wealth. It is an abstract economic concept, and, as
such, has many different definitions and classifications, but the unifying feature of capital is
that it has a certain value, so it in itself is a type of wealth, and it has the potential of
generating more wealth.

Features of Capital:-

Capital has the following features.

1. Capital is a man made.

2. Capital is a perishable.

12
 3. Capital is a human control possible.
4. Capital is a mobile.
5. Capital is a human sacrifice.
6. Capital is a scarce.
7. Capital is a passive factor.

Introduction of Working Capital:-

Working capital could be defined as the portion of assets used in current operations. The
movements of the funds from capital to income and profits and back to working capital are
one of the most important characteristics of the business. This cyclical operation is concerned
with utilization of the funds with the hope that will return with an additional amount called
income. If the operations of the company are to run smoothly, a proper relationship between
fixed capital and current capital has to maintain.
Sufficiently liquidity is important and must be achieved and maintained to provide that funds
to pay off obligation as they arise.

The adequacy of cash and other current assets together with their efficient handling, virtually
determine the survival of demise of the company. A businessman should be able to judge the
accurate requirement of working capital and should be quick enough to raise the enquired
funds to finance he working capital needs.

Working capital is also cal ed as net current assets, “it is the excess of current assets over
current liabilities.” Al organization has to carry working capital. It is important from the
point of view of both liquidity and profitability. Poor management of working capital means
that funds that unnecessarily tied up in idle assets hence educing liquidity and also reducing
ability to invest in productive assets such as plant and machinery. So affecting profitability.
The term working capital refers to current assets, which may be defined as:

i) Those which are convertible into cash or equivalents with the period of one year

ii) Those which are required to meet day to day operations

13
The fixed as well as current assets, both requires investment of ‘Funds’. So the management
of working capital and fixed assets apparently seem to involve it type of consideration but it
is no so. The management of working capital involve different concept and methodology than
the techniques used in fixed assets management.
Objective Of Working Capital & Research Methodology:-

Working capital management is very important in modern business. The analysis of working
capital is also very useful for short-term management of funds. The following are objective of
study:

1) To make. Items wise analysis of the elements or component of working capital to

identify the items responsible for change in working capital.
2) To calculate working capital for last year of the company.

Scope & Limitation of the Study:-

1. The Study is limited to only the last year performance of the Company.
2. The data used in this study have been given commercial Manager. As per the
requirement and necessary some data are grouped and sub grouped.
3. For making a clear-cut opinion, Ratio technique of financial management has
been used.

IMPORTANCE OF WORKING CAPITAL :-

1. Solvency of the business: Adequate working capital helps in maintaining the

solvency of the business by providing uninterrupted of production.
2. Goodwill : Sufficient amount of working capital enables a firm to make prompt
payments and makes and maintain the goodwill.
3. Easy loans: Adequate working capital leads to high solvency and credit standing can
arrange loans from banks and other on easy and favorable terms.

14
 4. Cash discounts: Adequate working capital also enables a concern to avail cash
discounts on the purchases and hence reduces cost.
5. Regular Supply of Raw Material: Sufficient working capital ensures regular supply
of raw material and continuous production.
6. Regular payment of salaries, wages and other day to day commitments: It leads
to the satisfaction of the employees and raises the morale of its employees, increases
their efficiency, reduces wastage and costs and enhances production and profits.
7. Exploitation of favorable market conditions: If a firm is having adequate working
capital then it can exploit the favorable market conditions such as purchasing its
requirements in bulk when the prices are lower and holdings its inventories for higher
prices.
8. Ability to Face Crises: A concern can face the situation during the depression.
9. Quick and regular return on investments: Sufficient working capital enables a
concern to pay quick and regular of dividends to its investors and gains confidence of
the investors and can raise more funds in future.
10. High morale: Adequate working capital brings an environment of securities,
confidence, high morale which results in overall efficiency in a business.

Data & Methodology of the Study:-

The data of DCM Ltd. for one year is used in this study have been taken from company.
Editing, classification and tabulation of the financial data, which are collected from the above-
mentioned sources, have been done as per the requirement of the study.

Methodology:-
1. The initial step of the project was studying about the company and then evaluating the
financial position of the company on the basis of ratio analysis.
2. Comparing the firm’s financial position with respect to its competitors i.e. Vardhman
Textiles, Malwa cotton and spinning mill, Nahar industrial enterprises and ginni
filaments ltd. With the help of following ratios:-
 Liquidity ratios
 Solvency/leveraging ratios
 Coverage ratios
 Activity/turnover ratios
 Profitability ratios
 Investors ratio
3. The project will focus on the study of overall working capital management at the
organizations, for which the following study analysis will be undertaken;

15
Classification of working capital:-
1 On the basis of concept.
2. On the basis of time.

On the basis of concept working capital is classified into two types:-

1. Net working capital
2. Gross working capital

1) Net Working Capital:-

Term Net working capital can be define in two way
i) It is the difference between current assets and current liabilities.
ii) Amount left for operational requirement.

2) Gross Working Capital:-

Gross working capital means the total current assets.
And On the basis of time working capital may be classified as:-
 Permanent working capital
 Temporary working capital

16
 ANK BORROWINGS:-

Bank provides various types of facilities to borrower to raise its funds which are described
here in below in the form of chart:-

As per financial statement of last accounting year, average holding period of different
components of working capital is as follows:

Description of current assets and current 2014-15 (Rs.)

liabilities
Stocks 795,807,291
Trade receivables 692,152,101
Cash & bank balances 53,105,704
Loans and advances 291,626,791
Other current assets 16,683,355
Current liabilities 1,307,725,193
Other Current liabilities 169,783,693
Provisions 7,675,657

The unit is having the following assumptions for working capital:-

Raw material:-
The DCM Textiles’ raw material holding is Rs. 522,210,782.00 as on 31.03.2015. Cotton
being a seasonal commodities is required to be stocked during the season period and higher
level of inventory gives a constant and smooth supply of raw-cotton which in turn increases
the productivity of the machines, as technical changes are not required to be made in
machines due to use of one type of cotton.

17
 Evaluation of working capital:-

The working capital management needs attention of all the finance head/ working capital
management is important for avoiding unnecessary blockage of fund. Like that liquidity is
important at it refer to the short-term financial strength of company. It is very important to
have proper balance in regard to the liquidity of the firm.

YEAR ENDED WORKING CAPITAL

(RS. IN LAKHS)

31 ST MARCH 2005 1551.41

31 ST MARCH 2006 2251.10

31 ST MARCH 2007 4416.50

31 ST MARCH 2008 8095.09
31 ST MARCH 2009 6179.17
31 st MARCH 2010 11009.24
31 st MARCH 2011 21071.99
31 st MARCH 2012 93915.43
31 st MARCH 2013 16601.39
31 st MARCH 2014 42719.05
31 st MARCH 2015 36419.06

18
 Table 1.

Particulars 2010-11 2011-12 2012-13 2013-14 2014-15

A) Current Assets: -
i) Inventories 1,539,676,299 686,451,272 823,377,964 915,433,075 795,807,291
ii) Sundry 524,540,343 314,758,759 410,634,543
Debtors 589,343,347 692,152,101
iii) Cash & Bank 8,16,190 10,35,080 18,12,464
Balance 31,960,904 53,105,704
170,483,304 95,205,454 131,040,166
iv) Loans &
_ 215,329,442 291,626,791
Advances
V) Other current 27,584,289 25,524,513 93,62,578 16,683,355
assets
2,235,516,136 1,125,034,054 1,392,389,650 1,761,429,346 1849,375,242

B) Current Liabilities:
11,11,85,084 1,185,267,850 1,225,303,015 1,327,748,129 1477,508,886
i) Current
Liabilities 17,131,893 612,642 1,072,656 6490678 7,675,657
ii) Provisions

128,316,977 1,185,880,492 1,226,375,670 1,334,238,807 1,485,184,543

2107,199,159 939,154,362 166,013,980 427,190,539 364,190,699

Working Capital (A-B)
Add: Provision for _ _ _ _ _
Contingencies

2,107,199,159 939,154,362 166,013,980 427,190,539 364,190,699

Net Working Capital
Requirement

40
 Chapter-4

Financial analysis-interpretation of ratios.

4.1FINANCIAL ANALYSIS:-

(A) LIQUIDITY RATIOS (SHORT-TERM LIQUIDITY):-

Liquidity ratios measure the short-term solvency i.e. the firm’s ability to pay its current dues
and also indicate the efficiency with which working capital is being used. Commercial banks
and short-term creditors may be basically in the ratios under this group.

(i) Current ratio or working capital ratio:-

Current ratio is a relationship of current assets to current liabilities

Current assets means the assets that are either in the form of cash or cash equivalents or can
be converted into cash or cash equivalents in short time(say within a year) like cash, bank
balances, marketable securities, sundry debtors, stocks, bills receivables, prepaid expenses.
Current liabilities mean liabilities repayable in as short time like sundry creditor, bills
payable, outstanding expenses, bank overdraft.

Computation:- The ratio is calculated as follows:-

Current ratio = Current assets

Current liabilities

20
COVERAGE RATIO:-

(i) Interest coverage ratio :

The interest coverage ratio establishes the relationship between PBIT ( profit before interest
and tax) and debt interest.

Computation:- This ratio is calculated as:

Interest coverage ratio= profit before interest and taxes

Debt interest

The numerator considers the profit before income tax and interest on both term and working
capital borrowings.
The denominator considers the interest charges, which are in the form of interest on long term
borrowings and not the interest on working capital facilities.

Interest DCM Vardhman Malwa Ginni Nahar

coverage Textiles textiles cotton filaments industrial
ratio ltd.

2014 11.05 3.30 0.39 1.39 1.58

Inference:

Maximum interest coverage is available in case of DCM indicating it is in good capacity to

pay the interest charges on debt.
Vardhman Textiles is also in a good position to pay off its debt.
In the case of malwa cotton the ratio is low which needs to be improved. That indicates that
the business is facing problem in generating cash its interest.
21
.

Objective:-
 .

Working DCM Vardhman Malwa Ginni Nahar

capital Textiles textiles cotton filaments industrial
turnover ltd.
ratio

2014 1.28 1.78 2.37 3.32 1.59

Inference:-

Company have to increase its working capital ratio.it needs to increase its sales. In
case of ginni flaments company is in a good position to generate cash from sales

Inventory turnover ratio:-

Computation:- this ratio is calculated as follows:-

Inventory turnover ratio= cost of goods sold

Average inventories

There can be no standard inventory turnover ratio which may be considered ideal. It may
depend on nature of industry and marketing strategies followed by the organization.

22
(a) Debtors’ turnover ratio:-

Computation: The ratio will be computes as:

Debtors turnover ratio= net credit sales

Average sundry debtors

Objective::-

 This ratio indicates the speed at which the sundry debtors are converted in the
form of cash. However this intention is not correctly achieved by making the
calculations in this way.

Debtors DCM Vardhman Malwa Ginni Nahar

turnover textiles cotton filaments industrial
Textiles
ratio ltd.

2014 6.84 8.15 3.34 10.81 7.52

ROA DCM Vardhman Malwa Ginni Nahar

textiles cotton filaments industrial
Textiles
ltd.

2014 0.17 0.18 0.08 0.13 0.14

Inference:-

All the four except malwa cotton is on same side indicating that the assets have been utilised
well to generate earnings but in case of malwa cotton it is on the lower side so the
management needs to make sure it utilises the assets well enough to generate good earnings.

23
(a) Return on capital employed (ROCE):
Computation: this ratio is calculated as:
ROCE= Profit before interest and taxes x 100
Average capital employed

Objective:-

 It is used in finance as a measure of the returns that a company is realising from

its capital employed.
 It is commonly used as a measure for comparing the performance between
businesses and for assessing whether a business generates enough returns to pay
for its cost of capital.
 ROCE measures the profitability of the capital employed in the business, a high
ROCE indicates a better and profitable use of long term funds of owners and
creditors. As such, a high ROCE will always be preferred.

Chapter-5
Swot analysis .

Internal External
Analysis Analysis

The SWOT analysis summarizes the internal factors of the firm as a list of its strengths and
weaknesses and the opportunities and threats it faces from its external environment.

24
 STRENTHS:-
1. Availability of manpower.

2. High quality product.

3. Low price high quality.

4. Availability of raw materials.

 WEAKNESS
1. Heavy transport charges.

2. Major consumption in paper industries but limited paper industries in Karnataka.

Chapter-6
Conclusions

After studying the components of working capital management.it s found that the company
has a very sound and effective policy and its performance is very good and has managed to
make good profit. Company is competing well at the domestic as well as the international
level because of its proper management of finance, specially the short term finance known as
the working capital.
The company is a matured one and it has contributed well in the countries growth and
development and will also continue to perform and contribute to the whole nation.
In conclusion, we can say that the company’s management is an effective one and knows wel
the management of finance; its working capital management system is very good.

Chapter-7
Bibliography
1. BOOKS
 Financial Management by RAVI M. KISHORE
 Working Capital Management by V.K.BHALLA
 Financial Management by I M PANDEY
 Research Methodology by C.R. KOTHARI

2. INTERNET SITESs

 www.dcmtextiles.co.in
 www.dcm.in/textiles.html
 www.google.com

25