A

PROJECT REPORT
ON
“INVENTORY ANALYSIS OF HINDALCO INDUSTRIES”

Submitted to:
GANGADHAR MEHER UNIVERSITY

In partial fulfillment of the BACHELOR OF COMMERCE(BCOM)

(2017-2020)

Submitted By:
Student Name: Nikita Agrawalla
Roll No: BC17COM-069
Registration No: 04911/17
Exam Roll No : UBC17COM069
Under the Guidance of:
Mr.Pradeep Kumar Harpal
 DECLARATION

Miss.NIKITA AGRAWALLA hereby declare that the project report submitted by me entitled
“INVENTORY ANALYSIS OF HINDALCO INDUSTRIES” in partial fulfillment for the
degree of BCOM to GANGADHAR MEHER UNIVERSITY is the record of original work
done by me. No part of the content of this report has been submitted to any institution/ university
for the award of any other degree.

Previous works in this field have been duly acknowledged as and when they have been referred.

Date: 04/07/20 Name: Nikita Agrawalla

Place: Sambalpur Roll. No. BC17COM 069
 ACKNOWLEDGEMENT

It is really a great pleasure to have this opportunity to describe feeling of gratitude imprisoned in

my heart.

I convey my sincere gratitude to Sir Pradeep Kumar Harpal (project Guide) for giving me

this opportunity to prepare my project report on “INVENTORY ANALYSIS OF HINDALCO

INDUSTRIES”. I express my sincere thanks to him for his support & guidance during completion

of my project Report and sparing his valuable time for the same.

I am also thankful to all the faculty members of GANGADHAR MEHER UNIVERSITY for

their support and guidance during completion of my project report and sparing their valuable time

for the same.

I am also thankful to my family members for their kind co-operation, which made my task easier.

Date: 04/07/20 Name: Nikita Agrawalla

Place: Sambalpur Roll No-BC17COM 069

 CERTIFICATE
This is to certify that Miss. NIKITA AGRAWALLA having ROLL NO-
BC17COM 069 has done her dissertation report on “INVENTORY ANALYSIS
OF HINDALCO INDUSTRIES ” and submitted the report in partial fulfillment
for the degree of Bachelor of commerce to Gangadhar Meher University under
my supervision and guidance. Her report is a record of original work done by her to
the best of my knowledge.

Date:04/07/20 project guide

Place: Sambalpur (Pradeep Kumar Harpal)
TABLE OF CONTENT:-
SI NO CHAPTER PAGE NO-

1 Introduction 06-13

2 Company profile 14-23

3 Inventory Analysis 24-33

4 Inventory Ratio Analysis 34-48

5 Inventory Practices at Hindalco Industrial Ltd 49-53

6 Finding And Suggestion 52-54

Conclusion 55
CHAPTER-1

INTRODUCTION:-

Introduction to inventory management

Importance of inventory management
Objective of the study
Scope of the study
Sources of data
Tools used
Limitation of study

INVENTORY MANAGEMENT CONCEPT:-

Introduction:-

Inventory Management is very important area of production management and

plays a vital role in the economic operations of a concern.It has been defind a
variety of ways and most of the definition stress the importance of control element
in achieving cost effectiveness. Irrespective of the range of particular discipline
which way have to be applied within the functional fields in meeting the needs of
individuals situation’s define

According to Prichard and Eagle ,inventory management can be defined as’’

the sum total of those activities necessary for their acquisition storage ,sales,
disposal or use of inventory”.

Inventory management impact is an integral part of production planning and

control which, accounting to Charles A.Kepke, may be defined as the co-ordination
of series of function according to plan which will economically utilize plant,
facilities and regulate the orderly movement of goods through their entire
manufacturing cycle, from procurement of all materials to the shipping of finished
goods at pre-determined rate. The scope of inventory management is not restricted
to technique of regulating the movement of technique of regulating the movement
of inventories and it rather coverts the entire range of function, which affects the
flow, conversion, quality and cost of inventories.

It can be inferred from the above definitions of inventory management that there are
two guiding principles in inventory management.

 Adequate inventory has to be maintained to avoid the stock out and causing
consequent production held up and the customer’s dissatisfaction.
  Excessive investment in inventory items must be avoid as it
increases the carrying and result in loss of profit.
 In view of these principles it may be inferred that for
manufacturing concern, inventory management is significant aspect of
production and financial

IMPORTANCE OF INVENTORY MANAGEMENT:-

Investment in inventory normally account for about 1/3 value of the total assets and for an
average manufacturing concern, cost of inventory represents about one half of the productcost.
Because inventory constitutes such a signficant part of product cost 7 since the cost is
controllable, proper planning, purchasing, handling ,accounting and control of inventories is of
grate significance.

Inventory Management is how great significance in a view of imperative need for

productivity growth. Optimal utilization of all available resources and avoidance of all types of
wastage especially in cash of raw materials is required for an ambitious programmer of economic
growth.

The importance of inventory management lies in the fact that may significant effort for the
reducing the materials cost will go along way in improving the profitability and rate return on
investment.

Following are the benefits of optimum inventory management:

It provides a check against the lose of materials through carelessness of pilferage. Inventory management
ensures an adequate supply of materials,stores,spares etc.Minimizes the stock out and shortages an avoids
a costly interruption in operations.
  It reduce length of Manufacturing cycle to the minimum.
 It enables the management make cost and consumption between operations and periods.

OBJECTIVES OF THE STUDIES:

The major objective of the study is to examine the effectiveness of inventory management
and its cost control.

Some of the other objective of the studies are:

 To study the working of Hindalco Industry Ltd, Hirakud

 To study the inventory management based on the ratios.
 To study the inventory management and its effective control through various
techniques.

SCOPE OF THE STUDY;-

Inventory management being a very important concept in all the company’s having a void
coverage often calls for the managerial attention. IN the Morden times inventory management has
become the integral part of the all companies. So all the firm give special importance for
inventory management. The effectiveness of inventory management system adopted by Hindalco
Industry Ltd,Hirakud. The study mainly focuses on the technique used like the financial ratios for
the period of

SOURCES OF DATA:-
 Sources of data can be understood as a the sources of the means from which the
information is collected. Data originally collected in the process of the investigation are know as
the primary data. Those collected by the other person is know as the secondary data.

The sources from which the original investigation is know as the primary sources. On the
other hand the sources did it self collected the data but took from other primary sources is know
as the secondary data. The information for this project is collected from both primary and the
secondary sources.

The information is collected from the secondary sources like internet, annual records, so
these are the main sources of data from which the information is collected for the preparation of
the project.

Methodology:-

 Inventory turn over ratio:

It indicates the number of times obtained by dividing the cost of sales by the
average sales. It indicates the number of times obtained by dividing the cost of sales by the
average sales.
Where,
Inventory turn over ratio=cost of good sold
Average inventory

Cost of good sold= Sales-Gross profit

 Inventory conversion period:
This ratio indicates number of day taken to convert the inventory
Where,

Inventory conversion period= 365/Inventory turn over ratio

  Duration of raw materials stage:
This indicates the number of days taken for the production unit to convert the raw
material to finish good.

Where,

Duration of raw materials= average raw materials

Average raw materials consumed per day

 Raw material turn over ratio:

This ratio indicates may help in determining stock holding policy in respect of
materials. It is also helpful in finding out the consumption pattern of raw material.

Where,

Raw material turn over ratio= cost of good sold

Average raw material

Raw material consumed= Opening Stock of material+Purchases-closing stock of

material

Average raw materials= Opening stock+Closing

 Inventory to current assets ratio:

This ratio express the relation between the stock and the current assets. It lights as
how much amount per rupee of current assets are represent stock.

Where,

Inventory to current assets= Inventory

Current assets

 Inventory to capital employed ratio:

This ratio indicates other than the other than the other assets,

Where,
 Inventory to capital employed= Inventory

Total capital employed

 Inventory to total asset ratio:

This ratio indicates the significance of this ratio is it reflects the portion inventory saw
percentage of total assets, which helps the management utilization of remaining resources
profitability.

Where,

Inventory total assets=inventory

Total assets

Limitation of the study:

The collection of information and mentioned above are subject to variation from time the
project duration of 60 days only to inventory management.

One limitation which could be mention here is, as there are some techniques of cost
control.

 It was not possible to collect information regarding the some techniques used the
company. Butimportant techniques were considered for the study.
 Data regarding cost control is not available for this study.
 Only five years data is used for the analysis of the study.
COMPANY PROFILE:
HINDALCO INDUSTRIES
Hindalco Industrial Limited a flagship company of the Aditya Birla group, Is structured
into strategic business i.e. aluminium and copper and is the industry leader in both segment. A
non-ferrous metals powerhouse, close to global scale, it rank among India’s top 10 companies in
terms of market capitalization.

The Hindustan Aluminium corporation limited was established in 1958 by the Aditya
Birla Group. IN 1962 the company began production in Renukoot in UttarPradesh. IN the over of
year the Hindalco is become not only India but also Asia one of the biggest producers of primary
aluminium.

In india,Hindalco enjoy a leadership position in primary aluminium and down stream

production, smelters are located at Hirakud,orissa,with a captive power plant and coal mines at
Aluparam,Kerala.Rolled product mannufacturingfacilities are located at belar and Taloj and
anextrasion plant at alupram.

The company’s R&D centre are located at Belgurum,Renukoot and Taloja.The

government of India’sdepartment of scientific and Industrial Research (DSIR) has recognized
these,Hindalco’s units are ISO 9001 and 14001 certified.

As a member of the Aditya Birlagroup, indal is a part of a $6 billion corporation, with a

market cap of $5 billion. The Group’s mulita-cultural,muliti-lingual work force of
72,000employees belong to 20 different nationalities and its production and services reach across
more than 100 countries.
SUBDIDIARIES& JOINT VENTURE:

Utkal Alumina International Limited (UAIL):

The joint venture company is a subsidiary of indal, which hold 55% equity

Suvas holding private limited (SHPL):

A subsidiary in which indal holds 51% equity stack.

SHARE HOLDERS PATTERN:

CATEGORY NO.OF PERCENTAGE OF

SHAREHOLDERS SHAREHOLDER

UTI & Mutual funds 3445869 4.85

Bank & Financial Industries 5538870 7.79

FII’s 768050 1.08

NRI / OBC’s 128174 .18

GDR’s 304658 .43

Corporate’s 1509401 2.12

Individual’s 6145767 8.64

State Govt. 204469 29

promoters 53066724 74.62

Total 71111982 100

SOME ACHVEMENT’S OF HINDALCO AS FACTFILE:

 India’s largest aluminium producer.

 Market share of 48%.
 One of the lowest-cost producers of aluminium in the world.
 Over 58% of sales in value-added product.
 Fully integrated aluminium plant at Renukoot, UP.
 Aluminium wheels plant at silvassa,in dadra &Nagar Haveli.
 Foil unit of indal at Kollur ISO 9001:2000 and 14001 certified.

 Aluminium refining capacity of 114,5000 tpe.

 Aluminium metal producing capacity of 424,000 tap.
 Captive power generation of 887.2 mw.

VISION:
``To be a premium metals major,
Global in size and reach,
With a passion for excellence”
 MISSION:
``To relentlessly pursue the creation of superior
Shareholder value by exceeding customer
Expectations profitability,
Unleashing employee potential and being a
Responsible corporation citizen adhering to our
Values”

SOCIAL VISION:
``To actively contribute to the social and economic
Development of the communicaties in which
We operate and beyond.
In so doing build a better, sustainable
Way of life for the weaker sections of society
And help rise the country’s Human Development Index”

VALUES:

Integrity:
Honesty un every action.

Commitment:
On the foundation of integrity, doing whatever it takes to deliver, as promised

Passion:
 Missionary Zeal, arising out of an emotional engagement with work

Seamlessness:
Thinking and working together across functional silos, hierarchy levels
business and geographies

Speed:
Responding to stakeholders with a sense of urgency.

QUALITY POLICY:
We, at Hindalco Industrial Limited, are committed to pursue and
sustain excellence through continual improvement in all our activities.
To achieve these goals, we shall:

 Meet and exceed the expectation of customers with speed, ensuring reliable
and consistent customer services.
 Associate with supplies to ensure high quality of input through proactive
partnership.
 Improve effectiveness of Quality Management System with emphasis on in
process control.
 Foster teamwork, educate, train, motivate and involve employee in achieving
the Quality Objective.
 Provide value for money and be globally competitive.
 ENVEROMENT & ENERGY POLICY:

We, at Hindalco Industrial Limited – a premier name in Aluminium

&Copper, Operating across the process chain from mining to semi-fabricate
product- stand committed to continually strengthen our energy efficiency and
environmental performance in order to achieve sustainable development.

OCCUPATIONAL HEALTH & SAFETY POLICY

We, at Hindalco Industries Limited, value people as our most are committed
to achieve excellence in health and safety management by providing a safe and
healthy work environment, at all location

COERPORATIE SOCIAL RESPONDIBILITY POLICY:

We, the employees of Hindalco Industrial Limited are committed to realise

our group social vision to actively contribute to the socio-economical development
of the underprivileged around us for a better, sustainable way of life and thereby
help raise the country’s Human Development Index.

The main focuses of hindalco in this area :

TAKE A VIEW OF HINDALCO INDUSTRIES, HIRAKUD.

HISTORY OF THE PLANT(Hirakud work)

The Hirakud-FRP plant was the establish by the Novelis. this plant was conceived on the
joint evaluation of the hindalco and Novlis teams in April 2009.It was followed by extensive
discussion held from April to September 2009 to finalise technical issue.The project got
management approval in September 2009civel work for the plant start in September 2010. Hot
commissioning of the plant began in October 2012, and commercial production began in April
2013 the rolling mill complex either a capacity of 135 KT per annum.

Hirakud-FRP plant, located in Sambalpur district, Odisha, about 325km from

Bhubaneswar, has one of the most sophisticated rolling mills in the contry.It specialise in yhin-
gauge tight tolerance productised over 50 acres.

Hirakud FRP produces about 22% of the total rolled product at hindalco. Our products
include foil stock, closure stock, fan blade stock, electronic panel stock, and other sheet and coils
required by the electrical, air conditioning, consumer durables and household sector.
 The plant power is fed by 132KV supply; it draws approximately 85% from our own
captive power plant under an open access arrangement. The remaining 15 % is grid supply. Water
is sourced from the river Mahanadi through CPP.

ORGANISATION STRUCTURE:
 CHAPTER 3

INVENTORY ANALYSIS

 Inventory Management

 Description of Inventory Control

 Effective cost control Techniques

INVENTORY MANAGEMENT:

In modern competitive one of the burning problem of every business and industries that of
cost control and cost reduction. An all pervasive effort for cost control and cost reduction is of
paramount, importance for survival and growth of every industrial enterprises. This is way
inventory management as a scientific device for controlling inventory cost and elimination
wastage, is now regarded as an integral part ofindustrial management . Inventory management
does not involve any human factor, as it concerns itself not with men but with inventory.

Meaning of Inventory :

The dictionary meaning of inventory is stock of goods, of a list of good; various authors
understand the world inventory differently. In accounting Language it may mean stock of initial
goods only. In a manufacturing concern, it may include raw material ; work in process and stores
etc. To understand the exact meaning of the world `inventory’ we may study it form the side point
of entry in the operation. Inventory includes following thing.

1. RAW MATERIALS:
The raw materials represent goods that are used in the production as a source
material.
Example-raw material are metal brought by car manufacturers, food ingredients
held by food preparation companies and crude oil held by refineries.

2. WORK IN PROGRESS:
Work in progress include goods that are in the process of being transformed during
manufacturing and are about to be converted into finished goods.
Example- a half assembled airliner or a ship that is begin built would be work in
process.
 3. FINISHED GOODS :
Finished goods are products that have gone through the production and ready for
sale, such as completed airliners reedy-to-ship cars and electronincs.Retailers who
buy and resell goods typically call inventory `` merchandise’’, which includes
finished goods brought from producers and can be resold immediately.

4. CONSUMABLES:
These are the materials, which are needed to smoothen the process of
production. These materials were not directly enter production but they
act as catalysts etc. Consumable ma be classified according to their
consumption and criticality.

PURPOSE-BENEFITS OF HOLDING INVENTORIES:

Although holding inventories involves blocking of firm funds and the cost of storage and
handling, ever business enterprise has to maintain a certain level of inventories to facilitate
uninterrupted production and smooth running of business. In the absence of inventories a firm
will have to make purchase as soon asit receives order. It will mean loss of time and delay in
execution of orders, which sometime may cause loss of customers abd business . Therefore also
need to maintain inventories to reduce ordering cost and avail liquidity discount etc.

Generally speaking ,there are three main motive of holding inventories:-

1) THE TRANSATION MOTIVE:

Which facilitates continuous production and timely execution of sale order.
2) THE PERCAUTIONARY MOTIVE:
Which necessitates the holding of inventories for meeting the unpredictable changes in
demand and supplies of materials.

3) THE SPECULATIVE MOTIVE:

Which includes to keep inventories for taking advantage of price fluctuation, saving in the
ordering cost and quantity discount etc.

INVENTORY MANAGEMENT:

The investment in inventory is very high in most of the undertaking

increased in a manufacturing wholesale and retail trade. The amount of
investment is sometime more in inventory than it other assets. In india,a
study of 29 major industries has revealed that the average cost of material is
64 paisa and the cost of labour over head is 36 paisa in a rupee. In

industrials like sugar, the material cost is high as 68.75% of the total
cost. About 90% of part of working capital is inventories. The proper
planning of purchasing handling, storing and accounting should from a part
of inventory management.

There are conflicting of different department heads over the issue of

inventory. The finance manager will try to invest less inventory because for
him it is an idle investment, where production manager will emphasis to
acquire more and more inventories as he does not want any interruption in
production due to shortage of inventory. The purpose of
 inventory ,management is to keep the stocks in such that neither there is over
stocking nor under-stocking.

OBJECTS OF INVENTORY MANAGEMENT:

The main objectives of inventory management or operational and finance

the operational objectives mean that the material and the spares should be
Honourable in the sufficient Liquidity is so that work is not disrupted for want of
infantry. The finance object means that investment in inventories should be remain
idle and minimum working capital should be locked in it the following are the
objective of inventory management.

I. To ensure continuous supply of materials spares and finished goods so

that production should not suffered at any time and the customers
demand should also be met.
II. To avoid both over stocking and under-stocking inventory.
III. To maintain investment in inventory is at the optimum level as required
by the operational and sales activities.
IV. To keep material cost and control so that they contribute in reducing cost
of production and overall costs.
V. To eliminate duplication in ordering or replenishing stock. This is
possible with the help of centralizing purchases.
VI. To minimize losses through deterioration, pilferage, wastages and
damages.
 VII. To design proper organization for inventory management. A clear-cut
accountability should be fixed at various levels of the organization.
VIII. To ensure perpetually inventory control so that materials shown in stock
ledgers should be actually lying in the stores.

PURPOSE BENEFITS OF HOLDING INVENTORY:

Although holding inventories involves blocking of firms funds and the cost
of storage and handling, every business enterprise has to maintain a certain
level of inventories to facilitate uninterrupted production and smooth running
of business. In the absence of inventories a firm With have to make purchases
as soon as it receives order. It will mean loss of time and delays in execution
of order, which sometime may cause loss of customers and business.

RISK AND COST OF HOLDING INVENTORIES:

The holding of inventories involves blocking of a firm fund and

incurrence of capital and other costs. It also exposes the firm to certain
risk;
The various part risk involved in holding inventories are below:-

i. RISK OF PRICE DECLINE

Holding inventory may increase the risk of decline in
price. This may be due to increase in supply of products in market
 by competitors, introduction of a new competitive product,
competitive pricing policy of competitors etc.

ii. RISK OF OBSOLESCENCE:

The is a risk of inventory becoming obsolescence. The
inventory may become outdated due to improved technology,
improvements in product design, changes in customer’s tastes etc.

iii. PURCHASE COST:

A firm has to pay high price for managing inventory. Inventory
management has to take into account of the price paid to the
suppliers and the expense of transport for bringing the material to
stores, insurance and transportation cost.

iv. ORDERING COST:

Cost of ordering is one another factor that a firm has to consider in
Inventory management. Ordering cost includes cost of
requisitioning, preparation of purchase order, transportation of
inventory, receiving the supplies at the warehouse etc.

v. CARRYING COST:

Carrying cost includes the cost of storing the inventory in

warehouse, handling expenses, insurance and rent paid for
managing the inventory, opportunity cost here refers to the
alternative use of funds that the firm would have used to invest in
stock.
 vi. STOCK OUT COST:
Stocks result in higher costs when they fall short of demand.
Shortage of stocks also result in higher cost, dissatisfaction among
customers, decrease in sales and increase of loss to firm.

INVENTORY CONTROL:

Inventory control includes performing one or more wide

various of staff or administrative function such as:

 Initiating, developing, installing or administrating control program.

 Developing Long range material support plans

 Analysing, evaluating, revising new inventory management systems.

 Providing guidance on or conducting survey of supply and inventory
management furcation.

MINIMUM LEVEL:
It represent the quantity below which the inventory of any item
should not be allow to fall, in other words an enterprise must maintain
minimum quantity of stocks. The following factors should be consider
in order to fix minimum stock level
 Reorder level
  Lead time
 Average rate of consumption of material

Where,

Minimum level= Reorder level- Average consumption* lead time

REORDER LEVLE:

The reorder level is the point at which if stock of a particular material in

store approaches the storekeeper should initiate the purchase requisition for fresh
supplies of that material. The level is fixed between maximum and minimum.

Where,

Reorder level= maximum consumption* maximum re-order period

SAFETY LEVEL:

The consumption rate of material and lead time don’t remain constant and
therefore to guard against the uncertainty, an extra stock is always maintained
which is know as safety stock.

INVENTORY CONTROL TECHNIQUES:

Inventory control techniques are employed by the inventory control.

Organization within the frame work of one of the basic inventory model, viz,fixed
order quantity systems or fixed order period system.
 Inventory techniques represent the operations aspects of inventory
management and help to realize the objective of inventory management and its
control

Several techniques of inventory control are it depend on the policy of the

firm production, the techniques most commonly used are:

 Always Better Control (ABC)

 High, Medium and Low (HML)
 Vital, Essential and Desirable (VED)
 Scare, Difficult and Easy to obtain (SDE)
 Fast moving, Slow moving and Non moving (FSN)
 Economic Order Quantity (EOQ)
 Max – minimum System
 Two bin System
 Material Requirement Planning (MRP)
 Just in Time (JIT)
CHAPTER 4

APPLIICATION OF FINANCIAL RATIOS

 INTRODUCTION
 RATIO APPLICATION ON INVENTORIES
MEANING OF RATIO:

Generally speaking a ratio is simply on require expressed in terms of another and those is an
assessment of one number in relation to the another.

An analysis of financial statement with the help of ratio may be termed as ratio analysis.

In other words ration analysis implies the process of computing determining and presenting
the relationship of items and group of financial statement.

1) Inventory Turnover Ratio:

Years Cost of good Avg.Inventory Inventory turn

sold Ratio

11-12 29217 6094.66 4.69:1

12-13 29074 6199.27 4.68:1

13-14 28357 5122.71 5.53:1

14-15 32015 5977.85 5.35:1

16-17 42868 6314.97 6.78:1

S. RATIO FORMULA INTERPERATION
NO

01 Inventory turnover ratio Cost of Goods Sold The inventory turnover

This ratio indicates this speed Average Inventory ratio in the year 2011-12
at which the inventory is was 4.79, 2012-2013 it was
converted into sales which 4.38, but increased in the
Contributed into salewhich Sale-Gross profit year2013-14 and also 2014-
contribution to profits of the 05. In the last year it was
organisation. Opening st+ Closing increased to 6.78.Ahigh
st ratio is a profit to the
- Cost of good sold 2 organisation
means sold means. and a low ratio would be
- Average inventory signify that inventory
doesn’t stays long time

GRAPH: 1
GRAPH SHOWING INVENTORY TURNOVER RATIO
 2011-2012 2012-2013 2013-20142014-2015 2015-2016
2) INVENTORY CONVERSTION PERIOD:

Table showing Inventory conversion period:

Year Inventory conversion period

2011-2012 76days

2012-2013 78days

2013-2014 66days

2014-2015 68days

2015-2016 53days
S no RATIO FORUMAL INTERPRETATION
01 Inventory conversion 365(day) Inventory conversion
period. This ratio indicates Inventory period during the year
the number of days taken to turnover ratio 2012 was 76 days which
convert the inventory. This it increased to 78 days in
ratio is useful deciding 2013, and it decreased to
organizationsefficiency and 66 days in 2014. And it
also helps the organization increased to68 days in the
is knowing its own year 2015 and there after
efficiency to improve its it decreased to 53 days
financial area. in2016.

GRAPH-2

INVENTORY CONVERSION PERIOD

 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

3)DURATION OF RAW MATERIAL STAGE:

Year Average raw Raw materials Duration

materials consumed per (days)
(lakhs) day (lakhs)

2011-2012 3571.22 180.00 19

2012-2013 3436.35 197.99 17

2013-2014 3045.83 214.56 14

2014-2015 3700.91 248.81 15

2015-2016 3636.12 317.26 11

Ratio Formula Interpretation

Duration or raw material Average raw material The trend of RM

stage: the number of day Average raw material stage in the 2011
taken for the production consume per day it was 35 daysand
unit to convert raw then it isdecreased
material to finish goods Opening st+ closing st to 33
Average raw materials 2 Days and then it was
increased to 48 days and
against it was decreased
 to 36 days in the year
2014-2015

GRAPH-3

2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

3) RAW MATERIALTURNOVER RATIO

Year Average Raw Raw material turnover

Materials(lakhs) ratio

2011-2012 3571.22 8.18:1

2012-2013 3436.35 8.46:1

 2013-2014 3045.83 9.31:1

2014-2015 3700.91 8.65:1

2015-2016 3636.12 11.78:1

Ratio Formula Interpretation

Raw material turnover Cost of good sold Raw material turnover

ratios velocity at which Average Raw materials ratio in the year 2012
raw material converted was 8.18:1 times, which
into goods reedy for is increased to 8.46:1
sale. If raw material times in the year 2013
turnover ratio is high and again it increased to
then company is 9.31: in the year
efficiency converting 2014/was decreased to
into finished goods. 8.65:1 and again
Sales-Gross Profit increased to 11.78:1
Cost of goods sold: times in the year 2016
Opening st+ closing st It indicates high
Average Raw Material 2 efficiency to covert the
finished goods.

GRAPHY-4
 RAW MATERIAL TURNOVER RATIO

2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

5)INVENTORY TO CAPITAL EMPLOYED;

Meaning:- this ratio indicate the relationship between the total capitals
employed and inventories.

Year Inventory (Lakhs) Total Capital Percentage

employed

2011-2012 6518.91 15,000 0.4379%

2012-2013 5879.64 16,900 0.3479%

2013-2014 4365.79 15,300 0.2853%

 2014-2015 7589.38 18,800 0.4036%

2015-2016 5040.56 19,800 0.2545%

Ratio Formula Interpretation

The inventory to capital Inventory In the year 2012 &2015

employed ratio: it shows the ratio of inventory to
Total capital Employed
how much capital total capital employed
utilized to invest in the were very high i.e.
inventories other then 0.4345& 0.4036 times,
the other assets. but there after it went
decreasing to 0.2545
Equity cap+ Preference times during the year
cap+Res& ser+ Long 2016
Capital Employed term borrowing –
fixiticious assets

GRAPH-5

INVENTORY TO CAPITAL EMPLOYED:

 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016

6) INVENTORY TO CURRENT ASSETS RATIO:

Year Inventory Current Assets Percentage

(Lakhs)

2011-2012 6518.91 9893.67 65.88

2012-2013 5879.64 9156.83 64.21

2013-2014 4365.79 7236.12 60.33

2014-2015 7589.38 10073.25 75.34

2015-2016 5040.56 1098.26 55.40

Ratio: Inventory to current assets ratio indicates the relationship between the
inventory and current assets. It shows the percentage of inventory to current
assets, which help the organizations in deciding the current assets policy.

Formula: Inventory
Current Assets

Interpretation;
The inventories to current assets ratio in the year 2012 was 68.88% and
in the year 2013 was decreased to 64.21% and again it decreased 60.33% in
the year 2014 but it increased of 75.34 % in the year 2015. There after it was
decrease to 55.40%

GRAPH-6

INVENTORY TO CURRENT ASSETS RATIO

 2011-2012 2012-2013 2013-2014 2014-2015 2015-2016
7) INVENTORY TO TOTAL ASSETS RATIO:

Year Inventory (lakhs) Total assets (lakhs) Percentage

2011-2012 6518.91 10,000 65.18

2012-2013 5879.61 10,600 55

2013-2014 4365.79 11,100 39.33

2014-2015 7589.38 12,700 59.75

2015-2016 5040.56 15,600 32.31

Ratio: inventory to total assets indicate the relationship between the

inventory and total Assets.
Formula: Inventory
Total assets
Fixed assets + Current assets

Interpretation: Durining the year 2012 the rate of inventory to total rate of
inventory to total assets was 65.18% and decreased to a less 55.46% and
again it was decreased to 39.33%. It was fluctuating from 59.75% and
32.32.31% during the year 2015 & 2016 respectively.
GRAPH-7
 INVENTORY TO TOTAL ASSETS RATIO

2011-20112 2012-2013 2013-2014 2014-2015 2015-2016

CHAPTER – 5

INVENTORY PRACTICES AT
HINDALCO INDUSTRIES LTD.
 INVENTORY MANAGEMENT
INTRODUCTION;
In Managing inventories the firm objective should be in
consonance with shareholder wealth maximization principals. To
achieve this the firm flexible. In efficient inventory control result in
flexibility.

The firm may run out of stock and some time may file up
unnecessary stock. This increase the level of investment and makes
the firm unprofitable.

The Hindalco Industries Ltd following are the some

techniques using for effective inventory and cost control:

ABC Analysis: These important item usually designated as class a may

accountfor more than half the total value usage in the inventories. These
items require very careful management and special carful estimates of
future usually class C items which in total account for only a few percent
of the total value of usage very little effort should be devoted to forecast
the requirement of items. The inter mediate class B items justify a
reasonable but routine effort in forecasting demand and managing
inventory.

The ABC approach is categoing inventory in three class i.e. A,B

and C according to potential amount to be controlled.

A-Items which are the 15%

B- Items which are the 25%
C- Items which are the 65%

F.S.N.CLSSIFICATION:

Material can be classified on the basis of movement as fast moving

slow moving and non moving item such as

Si.No F S N

1 Soars Guage glass

2 Oil and Lubricant C.I. impeller

3 Cylinders Rubber packing

4 Welding rods

V.E.D. CLASSIFICATION:
 THE material’s classification on the items is called V.E.D analysis V.E.D stands
for V=Vital, E= Essential , D= desirable.

Si.NO V E D

1 Seat kit Piston ring Casing cover

2 Speed Belt B. Cylinder Pressure plate

FIFO AND LIFO CLASSIFICATION:

These are the items which are classified on the basis of its range. Fifo indicates
first in first out. Lifo items indicates last in last out

Si. No Items

1 Fevicol

2 Plants

3 Lubricant

4 Masks

5 V-Belts
CHAPTER 6

FINDING AND SUGGESTIONS

FINDINGS & CONCLUSION

 This project can be conclude by saying that inventory management and its
cost control is one of the importance area where the companies have to give more
importance. Inventories constitute the large part of the current assets of the
company. The manufacturing companies hold inventories is the form of raw
material, work in process and finish goods. There are mainly three motives behinds
holding the inventories, the are,

 To facilitate the smooth functioning

 To guard against the risk of unpredictable changes in the usage rate
and delivery period
 Take the advantage of price fluctuation

The financial analysis in the project help in identifying the inventory

utilization of its resources and its profitability.

1)INVENTORY TURNOVER RATIO:

Comparative statement:

si ratio 2011-12 2012-13 2013-14 2014- 2015-

15 16

1 Inventory Turn over

ratio

2 Cost of good sold 29219 29074 28357 32015 42868

3 Avg. Inventory 6094.66 6199.27 5122.71 5977.35 6317.97

turnover ratio

4 Inventory turnover 4.79 4.68 5.53 5.35 6.78

 ratio

Interpretation: The inventory turnover ratio in the year 2011-2012 was 4.79, 2012-
13 it was 4.38, but increased in the year 2013-14, and also 2014-15. In last year it
was increased to 6.78. A high ratio is a profit to the organization and a low ratio
would be signify that does stay long time.

2) INVENTORY TO CAPITAL EMPLOYED:

Comparative Statement:

Capital Employed = Inventory

___________

Total capital Employed

si Ratio 2011-12 2012-13 2013-14 2014- 2015-

15 16

1 Inventory 650.91 5879.64 4365.79 7589.3 5040.56

8

2 Total Capital 15 169 153 188 198

Employed

3 Percentage 43.45% 34.79% 28.33% 40.36% 25.45%

Interpretation: in the year 2012 &2015 the ratio of inventory to total capital
employed were very high i.e. 0.4345 &0.4036 times, but there after it went
decreasing to 0.2545 times during in year 2016.
 SUGGESTIONS

After the analysis, suggestion could as below.

1) Inventory turnover ratio of Hindalco Industries Ltd. In the year 2015-2016 is

satisfied but company should by
 Minimize inventory
 Keep the level of inventory according to market demand
2) They have to implement E.R.P. software
3) The company should follow the E.O.Q Modal

BIBLIOGRAPHY
 FINANCIAL MANAGEMENT : I.M PANDY

 FINANCIAL ACCOUNTING : S.P.JAIN & K.L. NARANG

 THEORY AND PRACTICES : B.K.MISHRA

 PRODUCTION MANAGEMENT : K.ASHWATAPPA

 WEB-SITE : ww.hindalco.com