A

STUDY ON

ASSET LIABILITY MANAGEMENT

AT

HERITAGE FOODS IND LTD

A Project report submitted to Osmania University

In partial fulfillment for the Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted by

P. MAHESH KUMAR

HT NO: 2121-20-672-001

UNDER THE GUIDANCE OF

--------------------------------------------

ARISTOTLE PG COLLEGE

(Affliated To Osmania University,Hyderabad)

Recognized By UGC under section 2(f) of UGC Act 1956

Beside Moinabad Police Station,

Chilkur, Moinabad ,Ranga Reddy District, Telangana.

2020-2022

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INTRODUCTION

Asset Liability Management (ALM) is a strategic approach of managing the balance sheet

dynamics in such a way that the net earnings are maximized. This approach is concerned with

management of net interest margin to ensure that its level and riskiness are compatible with

the risk return objectives.

If one has to define Asset and Liability management without going into detail about its

need and utility, it can be defined as simply “management of money” which carries value and

can change its shape very quickly and has an ability to come back to its original shape with or

without an additional growth. The art of proper management of healthy money is ASSET

AND LIABILITY MANAGEMENT (ALM).

The Liberalization measures initiated in the country resulted in revolutionary changes in

thesector. There was a shift in the policy approach from the traditionally administered market

regime to a free market driven regime. This has put pressure on the earning capacity of co-

operative, which forced them to foray into new operational areas thereby exposing

themselves to new risks.As major part of funds at the disposal from outside sources, the

management are concerned about RISK arising out of shrinkage in the value of asset, and

managing such risks became critically important to them. Although co-operatives are able to

mobilize deposits, major portions of it are high cost fixed deposits. Maturities of these fixed

deposits were not properly matched with the maturities of assets created out of them. The tool

called ASSET AND LIABILITY MANAGEMENT provides a better solution for this.

ASSET LIABILITY MANAGEMENT (ALM) is a portfolio management of assets and

liability of an organization. This is a method of matching various assets with liabilities on the

basis of expected rates of return and expected maturity pattern

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 In the context of ASSET LIABILITY MANAGEMENT is defined as “a process of

adjusting s liability to meet loan demands, liquidity needs and safety requirements”.This will

result in optimum value of the same time reducing the risks faced by them and managing the

different types of risks by keeping it within acceptable levels.

RBI revises asset liability management guidelines

On February 6/2014

Guidelines on ALM system issued in February 1999(first revised), covered, inter alia, interest

rate risk and liquidity risk measurementreporting framework and prudential limits. Gap

statements are prepared by scheduling all assets and liabilities according to the stated or

anticipated re-pricing date or maturity date. As a measure of liquidity management, banks

were required to monitor their cumulative mismatches across all time buckets in their

statement of structural liquidity by establishing internal prudential limits with the approval of

their boards/ management committees. As per the guidelines, in the normal course, the

mismatches (negative gap) in the time buckets of 1-14 days and 15-28 days were not to

exceed 20 per cent of the cash outflows in the respective time buckets.

In the era of changing interest rates, Reserve Bank of India (RBI) has now revised its Asset

Liability Management guidelines. Banks have now been asked to calculate modified duration

of assets (loans) and liabilities (deposits) and duration of equity.

This was stated by the executive director of RBI, V K Sharma, and here today. He said that

this concept gives banks a single number indicating the impact of a 1 per cent change of

interest rate on its capital, captures the interest rate risk, and can thus help them move

forward towards assessment of risk based capital. This approach will be a graduation from

the earlier approach, which led to a mismatch between the assets and liabilities.

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The ED said that RBI has been laying emphasis that banks should maintain a more realistic

balance sheet by giving a true picture of their non performing assets (NPAs), and they should

not be deleted to show huge profits. Though the banking system in India has strong risk

management architecture, initiatives have to be taken at the bank specific level as well as

broader systematic level. He also emphasized on the need for sophisticated credit-scoring

models for measuring the credit risks of commercial and industrial portfolios.

Emphasizing on a need for an effective control system to manage risks, he said that the

implementation of BASEL II norms by commercial banks should not be delayed. He said that

the banks should have a robust stress testing process for assessment of capital adequacy in

wake of economic downturns, industrial downturns, market risk events and sudden shifts in

liquidity conditions. Stress tests should enable the banks to assess risks more accurately and

facilitate planning for appropriate capital requirements.

Sharma spoke at length about the need to extend the framework of integrated risk

management to group-wide level, especially among financial conglomerates. He said that

RBI has already put in place a framework for oversight of financial conglomerates, along

with SEBI and IRDA. He also said that at the systematic level efforts are being made to

create an enabling environment for all market participants in terms of regulation,

infrastructure and instruments.

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 CHAPTER-II

REVIEW OF LITERATURE

ASSET LIABILITY MANAGEMENT (ALM) SYSTEM:

INTRODUCTION:
In the common direction, there exhibited to credit and enterprise interest perils in context of
the benefit criminal duty trade. With the headway in the Indian money related markets over
the latest years and making mix of domestic markets and with external markets the dangers
associated with operations have grow to be convoluted, a ways attaining, requiring stragic
agency. Are thru and by way of operating in an acceptably deregulated situation and are
required to determine their own, leverage expenses on stores and improve in each domestic
and abroad money related buildings on a dynamic basis. The strengthen prices on pastimes in
authorities and more than a few securities moreover are at gift promote related. Genuine
opposition for corporation mission regarding every the property and liabilities, all things
viewed with developing insecurity inside the domestic side interest fees, has delivered strain
on the corporation spare a best incredible amongst spreads, efficiency and lengthy haul
reasonableness. Impudent liquidity agency can placed benefits and popularity at grand
hazard. These weights call for advanced and intensive measures and no longer truly adahoc
movement. The manipulate of necessities to construct their wander options as for a dynamic
and fused hazard control tool and strategy, pushed via corporate framework. Are uncovered
to a couple of simple threats in route in their enterprise attempt FICO appraisal hazard,
redirection charge and operational chance alongside these lines crucial than show
knowledgeable shot manage systems that sport design with the troubles related to hobby fee,
forex and liquidity dangers.

Need to alter to the ones perils basedly with the aid of sparkling their chance manipulate and
greedy greater combination Asset-Liability control (ALM) practices than has been done so
far. ALM amongst numerous limits, is in like way involved with peril manipulate and offers a
total and dynamic structure for measuring, checking and dealing with liquidity mortgage
price, far flung alternate and esteem and product fee chance of a that wishes to be immovably
joined with the wander technique. It consists of assement of various types of risks altering the
gain real blue duty portfolio progressively with a reason to manipulate threats.

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The simple consideration regarding the ALM limit is probably to execute the likelihood
manipulate put together, viz., and overseeing wander consequent to reviewing the threats
involved.
In like manner, the dealing with the unfold and risk, the ALM trademark is extra effectively
discovered as an included approach which calls for simultaneous alternatives about
asset/valid responsibility mix and adulthood structure.

RISK MANAGEMENT IN ALM

Risk business enterprise is a dynamic framework, which needs unfaltering discernment and
thought. The chance of threat manipulate is a striking financing figure out that the most
primary farthest point returns are associated to the minimal relaxed undertakings. There may
additionally be no unmarried reply for all situations, choices ought to be exchanged at brief
word, that is persistently used to assume defenselessness, makes every likelihood and
problems for sizeable business and people in each and every walk spherical lifestyles.

Risk now after which is purposefully dismembered and supervised, specific instances threat
is simply disregarded, perhaps out of nonattendance of know-how of its property. If setback
with apprehend to hazard is sure to occur, it might also be contemplate for earlier and seen as
to right, perceived rate. Associations and persons might also additionally likewise mission
and preserve away from threat of trouble as abundance as can be permitted or lower its
terrible results.

A couple of combos of risks that have an effect on human beings and undertakings had been
delivered, collectively with processes to gage the diploma of risk. The technique used to
purposely manipulate peril notoriety is known as RISK MANAGEMENT. Despite whether
or not or now not the prefer is with a commercial enterprise undertaking or a individual
condition, the similar standard advances can be used to methodicallly dissect and address
chance.

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 STEPS IN RISK MANAGEMENT:
1. Risk identification
2. Risk evaluation
3. Risk management technique
4. Risk measurement
5. Risk review decisions

Integrated or enterprise risk management is an emerging view that recognizes the

importance of risk, regardless of its source, in affecting a firm ability to realize its strategic
objectives. The detailed risk management process is as follows;

Risk identification:

The first step in the risk management process is to identify relevant exposures to risk.
This step is important not only for traditional risk management, which focuses on uncertainty
of risks, but also for enterprise risk management, where much of the focus is on identifying
the firm’s exposures from a variety of sources, including operational, financial, and strategic
activities.

Risk evaluation:
For each source of risk that is identified, an evaluation should be performed. At this
stage, uncertainty of risks can be categorized as to how often associated losses are likely to
occur. In addition to this evaluation of loss frequency, an analysis of the size, or severity, of
the loss is helpful. Consideration should be given both to the most probable size of any losses
that may occur and to the maximum possible losses that might happen.

Risk management techniques:

The results of the analyses in second step are used as the basis for decisions regarding
ways to handle existing risks. In some situations, the best plan may be to do nothing. In other
cases, sophisticated ways to finance potential losses may be arranged. The available
techniques for managing risks are GAP Analysis, VAR Analysis, Heinrich Domino theory
etc., with consideration of when each technique is appropriate.

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 CHAPTER-III

RESEARCH METHODOLOGY

1.2 NEED AND IMPORTANCE OF THE STUDY:

The need of the study is to concentrate on the growth and performance by using asset and

liability management and to know the management of nonperforming assets .To know

financial position and to analyze existing situation which helps to improve the performance

of company.The prime importance of the study is to analyze the maintenance of the asset and

liability it helps to compete with the other cooperatives.

1.1 SCOPE OF THE STUDY:

In this study the analysis based on ratios to know asset and liabilities management and to

analyze the growth and performance by using the calculations under asset and liability

management based on ratio of the company. It covers both a prudential and component and

an optimization role, with in the limits of compliance .

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1.2 OBJECTIVES OF THE STUDY

 The main objective of the study is to present a proven solution set which achieves

integrated risk management.

 To study the concept of asset liability management and the process of cash inflow

and outflow .

 To practice financial risk arises due to the mismatch between asset and liability .

 To study reserves cycle of ASSET LIABILITY MANAGEMENT

 It also ensures an acceptable balance between profitability and growth rate.

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1.5 METHODOLOGY OF THE STUDY
The study of Asset-Liability Management is based on
 Secondary data collection

SECONDARY DATA COLLECTION:

Collected from books regarding journal, and management containing relevant information
about ALM and Other main sources were
 Annual report
 Published report
1.7 PERIOD OF THE STUDY:
The data is obtained from the HERITAGE FOODS IND LTDfor the purpose of Assets
and liability. The information is gathered from different channels for a period of 45 days.

1.8 REFERENCE PERIOD:

For the present study, the data pertaining to financial year 2017-2021 was collected.

TOOLS FOR DATA ANALYSIS

 Return on assets (ROA) is a financial ratio that shows the percentage of profit a
company earns in relation to its overall resources. It is commonly defined as net
income divided by total assets.
Net Income
Return on assets (ROA) ══ -----------------------
Average total assets
 Return on equity (ROE) is a measure of the profitability of a business in
relation to the equity, also known as net assets or assets minus liabilities. ROE is
a measure of how well a company uses investments to generate earnings growth.
Net Income
Return on equity (ROE) ══ ------------------------------
Average stockholders’ equity
 Return on common equity ratio (ROCE) reveals the amount of net profit
that could potentially be payable to common stockholders.
Net Income
Return on common equity══ -------------------------------------
Average common stockholder’s equity

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 1.6 LIMITATION OF THE STUDY:
1. The subject is based on past data of HERITAGE FOODS IND LTD

2. The analysis is based on structural liquidity assertion and hole evaluation.

3. The study is mainly based totally on secondary facts.

4. There was a constraint with regard to time allocation for the research study i.e for only a
period of 45 days.

5. Detailed study of the topic was not possible due to limited size of the project.

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 CHAPTER-IV
COMPANY PROFILE
The Heritage Group, founded in the year 1992 by Sri Nara Chandra Babu Naidu, is one of the
fastest growing Private Sector Enterprises in India, with five-business divisions viz., Dairy,
Retail, Agri, Bakery and Renewable Energy under its flagship Company Heritage Foods
Limited (Formerly known as Heritage Foods (India) Limited). The annual turnover of
Heritage Foods crossed Rs.1726.99 crores in financial year 2015-14.
Presently Heritage’s milk products have market presence in Andhra Pradesh,Telangana,
Karnataka, Kerala, Tamil Nadu, Maharashtra, Odisha and Delhi and its retail stores across
Bangalore, Chennai and Hyderabad. Integrated Agri operations are in Chittoor and Medak
Districts and these are backbone to retail operations and the state of art Bakery division at
Uppal, Hyderabad, Telangana.
In the year 1994, HFIL went to Public Issue to raise resources, which was oversubscribed 54
times and its shares are listed under B1 Category on BSE (Stock Code: 519552) and NSE
(Stock Code: HERITGFOOD)

About the founder:

Sri Chandra Babu Naidu is one of the greatest Dynamic, Pragmatic,
Progressive and Visionary Leaders of the 21st Century. With an objective of bringing
prosperity in to the rural families through co-operative efforts, he along with his relatives,
friends and associates promoted Heritage Foods in the year 1992 taking opportunity from the
Industrial Policy, 1991 of the Government of India and he has been successful in his
endeavour.
At present, Heritage has market presence in all the states of South India. More
than three thousand villages and five lakh farmers are being benefited in these states. On the
other side, Heritage is serving more than 6 lakh customer’s needs, employing more than 700
employees and generating indirectly employment opportunity to more than 5000 people.
Beginning with a humble annual turnover of just Rs.4.38 crores in 1993-94, the sales
turnover has reached close to Rs.300 crores during the financial year 2005-2006.
Sri Naidu held various coveted and honourable positions including Chief
Minister of Andhra Pradesh, Minister for Finance & Revenue, Minister for Archives &
Cinematography, Member of the A.P. Legislative Assembly, Director of A.P. Small
Industries Development Corporation, and Chairman of Karshaka Parishad.

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 Sri Naidu has won numerous awards including " Member of the World
Economic Forum's Dream Cabinet" (Time Asia), "South Asian of the Year " (Time Asia), "
Business Person of the Year " (Economic Times), and " IT Indian of the Millennium " (India
Today).
Sri Naidu was chosen as one of 50 leaders at the forefront of change in the
year 2000 by the Business Week magazine for being an unflinching proponent of technology
and for his drive to transform the State of Andhra Pradesh.

Forward looking statements:

“We have grown, and intended to grow, focusing on harnessing our
willingness to experiment and innovate our ability to transform our drive towards excellence
in quality, our people first attitude and our strategic direction.

Mission:
Bringing prosperity into rural families of India through co-operative efforts and providing
customers with hygienic, affordable and convenient supply of " Fresh and Healthy " food
products.

Vision:
To be a progressive billion-dollar organization with a pan India foot print by 2020.

To achieve this by delighting customers with "Fresh and Healthy" food products, those are a
benchmark for quality in the industry.
We are committed to enhanced prosperity and the empowerment of the farming community
through our unique "Relationship Farming" Model.
To be a preferred employer by nurturing entrepreneurship, managing career aspirations and
providing innovative avenues for enhanced employee prosperity.

Heritage Slogan:
When you are healthy, we are healthy
When you are happy, we are happy
We live for your "HEALTH & HAPPINESS"
Quality policy of HFIL:

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 We are committed to achieve customer satisfaction through hygienically processed
and packed Milk and Milk Products. We strive to continually improve the quality of our
products and services through upgradation of technologies and systems.
Heritage's soul has always been imbibed with an unwritten perpetual commitment to
itself, to always produce and provide quality products with continuous efforts to improve the
process and environment.
Adhering to its moral commitment and its continuous drive to achieve
excellence in quality of Milk, Milk products & Systems, Heritage has always been laying
emphasis on not only reviewing & re-defining quality standards, but also in implementing
them successfully. All activities of Processing, Quality control, Purchase, Stores, Marketing
and Training have been documented with detailed quality plans in each of the departments.
Today Heritage feels that the ISO certificate is not only an epitome of
achieved targets, but also a scale to identify & reckon, what is yet to be achieved on a
continuous basis. Though, it is a beginning, Heritage has initiated the process of
standardizing and adopting similar quality systems at most of its other plants.

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 CHAPTER-V

CHAPTERIZATION
CHAPTERIZATION
CHAPTER-1
INTRODUCTION
CHAPTER-2
REVIEW OF LITERATURE
CHAPTER-3
RESEARCH METHODOLOGY
 NEED OF THE STUDY
 OBJECTIVES OF THE STUDY
 SCOPE OF THE STUDY
 DATA COLLECTION
 LIMITATIONS
 STATISTICAL TOOLS
CHAPTER-4
INDUSTRY/COMPANY PROFILE
CHAPTER-5
DATA ANALYSIS
CHAPTER-6
FINDINGS
CHAPTER-7
SUGGESTION & CONCLUSION
BIBLIOGRAPHY
ANNEXURES

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