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“WORKING CAPITALMANAGEMENT:A Comparative Analysis

Ofa!"r In#ia Lt#$ an#%in#"stan &nilever Lt#$'

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A(&R In#ia Lt#• Dabur India Ltd is one of India’s leading FMCG Companies with

Revenues of over Rs 7,7! Cr " Mar#et Capitali$ation of %& '( )illion• Dabur is today India!s "ost trusted na"e and the #orld!slargest Ayurvedic and $atural %ealth Care Co"pany

• Dabur today operates in 'ey consu"er productscategories li'e %air Care( Oral Care( %ealth Care( S'in

Care( %o"e Care and oods

•Master brands)

 a!"r + Ayurvedic healthcare products

)ati*a + ,re"iu" hair care

%a+mola + Tasty digestives

R,al + ruit juices & beverages

-em + airness bleaches & s'in care products

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%istory

.//0 1 -stablished by Dr S . /ur"an at .ol'ata.234 1 Auto"ation and up gradation of

Ayurvedic products "anufacturing initiated

.235 1 Dabur 0Dr S . /ur"an1 ,vt 2td

Incorporated.267 1 Shifts base to Delhi fro" Calcutta.262 1 Dabur Research & Develop"ent Centre

0DRDC1 set up & Co""ercial production startsat Sahibabad( the "ost "odern herbal"edicines plant at that ti"e

.225 1 -nters foods business #ith the launch ofReal ruit 3uice

.22/ 1 /ur"an fa"ily hands over "anage"ent

of the Co"pany to professionals

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7447 1 Dabur record sales of Rs 445647 crore ona net pro8t of Rs 599 crore

7448 1 The /oard also proposed an increase inthe authori:ed share capital of the Co"pany fro"

e;isting Rs < crore 7446 1 Celebrating 4= years of Real+Dabur oods

unveiled the ne# pac'aging and design for Realat the co"pletion of 4= years of the brand

744/ 1 Ac?uires e" Care ,har"a+Dabur Indiaac?uires e" Care ,har"a( a leading player in the#o"en@s s'in care "ar'et

74.. 1 Dabur enters professional s'in care"ar'et+Dabur enters professional s'in care

"ar'et #ith the launch of O;y2ife ,rofessionalacial .it( created e;clusively for professional use

74.7 1 Dabur India 2td surpassed the /illion+Dollar Turnover "ar' during the >=44+4> 8scal to

end the year #ith $et Sales of Rs 64B Crore

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)ision 9 Prinipal of a!"r lt#

)ision :1 ;e#iate# to t

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About The Topic

 This research #or' carry out a co"parativeanalysis on #or'ing capital "anage"ent ofDabur & %2 co"panies The study ai"ed toe;a"ine the cost of #or'ing capital and the

eEect on 8r" perfor"ance and to ta'e acritical vie# of the adopted li?uidity "easuresSecondary data #ere e"ployed in this studyfro" journals( te;tboo's and annual reports ofthe selected co"panies %o#ever( ratioanalysis #as used to analy:e the datacollected #hich is the best statisticaltechni?ues for #or'ing capital "anage"ent

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RE?EARC% MET%OOLOG@   The "ethod used in this RE?EARC% done by Data

Collection and there are t#o sources for data collection)◦ ,ri"ary source of data

◦ Secondary source of data

  The data collected for this project has been ta'en fro"the secondary source Sources of secondary data are)+

Annual reports of the co"pany

Ratios of the co"pany

,&2 accounts of the co"pany

Details of Dabur India 2td & %ul 2td

  e #ill be doing a co"parative study of both theco"panies these averages have been "anually calculatedfor the purpose of this study speci8cally The tools used foranalysis the Dabur India 2td & %ul 2td

SOT Analysis

,-ST2- Analysis

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O!+etive of st"#y

  The study ai"s at analy:ing the #or'ingcapital "anage"ent of Dabur India2i"ited The "ain objectives are)

 To discover the relative i"portance ofvarious current assets co"ponents ofDaburF

 To dra# conclusion on the eEectivenessof #or'ing capital "anage"ent at DaburF

 Dabur India 2td is analy:ed on otherpara"eters also li'e SOT analysis(,-ST2- analysis ( Ratio analysis

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Analysis an#interpretation

?WOT ANAL@?I??tren>t

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Opport"nities

Gro#ing A#areness of AyurvedaI"proper and nhealthy ood habits

Gro#ing Rural Mar'ets

Gro#ing Middle Class o"en and

/eauty Sector

T

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*+&+L -nal.sis/ 0

POLITICAL -ACTOR?:Govern"ent intervences ) Govern"ent support the industry to

e;pand & to e;port it@s products & to gro#

 Trading policies ) Trading policies are also favourable for daburco"pany so it can e;port it@s products & it also help hi" toe;pand & to gro#

ECONOMIC -ACTOR? :Consu"er focus ) they are continuously focussing on analysing

the consu"er needs &develop products to ful8ll there needs This is the "ain reason for the gro#th of Dabur co"pany

2iving standard ) Rise in the living standard of people haveincreased their production level( & produce high ?uality &variety of products

$ational inco"e ) $ational inco"e is i"portant factor as if aEectthe gro#th of the organisation If per capita inco"e is "ore the

a"ount spend #ill be "ore & if it #ill be lo#er the a"ountspent #ill be less

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SOCIO+C2TRA2 ACTORS )

Consu"eris" ) This indicates that a large nu"berof options are available #hile purchasing of goods

to consu"ers( so the choice beco"es easy &?uality products can be choose by consu"ers So#hile purchasing a consu"er have diEerentchoices to select product according to his needs

-ducation levels ) -ducation is one of the "osti"portant factor #hich inHuence the buying po#erof consu"er( #hile selecting a particular good aconsu"er should 'no# all it@s features so it candiEerentiate the" #ith another products

2a# aEect social behaviour ) DiEerent la#s are"ade by the govern"ent to safe guard the rightsof consu"ers or e;a"ple+ Consu"er protectionact( this la# indicates that a consu"er can 8le acase against a seller if he 8nds that he is cheated

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 T-C%$O2OGICA2 ACTORS )Discoveries & innovation ) Continuous innovation in

products & processes is the basis of there services They provide consu"ers #ith innovative products#ithin easy reach /uild a platfor" to enable Dabur tobeco"e a global ayurvedic leader

Advance"ent in technology ) ocus on gro#ing there

core brands across categories( reaching out to ne#geographies( #ithin and outside India( and i"prove

operational eciencies by leveraging technologyAuto"ation ) Change in technology #ill leads to

auto"ation( this "eans that #ith ne# technologylabour re?uired is less as "achines are auto"atic Allthe #or's are done auto"atically by the "achines asearlier it is labour oriented $o# all the #or' is"achine oriented

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-$JIRO$M-$TA2 ACTORS )-nviron"ent regulations ) The preferred co"pany to

"eet the health and personal groo"ing needs of there

target consu"ers #ith safe( ecacious( natural solutionsby synthesi:ing the deep 'no#ledge of ayurveda andherbs #ith "odern science

-nviron"ental protection ) Responsible co"pany toprotect -cological syste" & use -co+friendly products

2-GA2 ACTORS )Co"panies la# ) The co"pany ful8ll all the Co"pany la#

re?uire"ent so as to gro# & develop & to sustain in theco"pitative "ar'et

-"ploy"ent la# ) -"ploy"ent la# provides e?ualopportunities to every citi:en to #or' & earn hislivelihood It provides e?ual opportunities to every citi:en

Consu"er protection ) This la# helps to protect the rightsof consu"ers & he can 8le a case against seller if he 8nd

that he is cheated

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Ratio Analysis:1 The various ratios chosen for analysis are as

follo#s)4 2i?uidity Ratios

•  Current Ratio

• Kuic' Ratio

• Cash Ratio> Turnover Ratios

•  Current Asset Turnover Ratio

• Debtors Turnover Ratio

• Inventory Turnover Ratio

6 Gearing Ratios

• Debt to -?uity Ratio

•

-?uity Ratio•

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Current Ratio

Interpenetration: A current ratio e?ual ornear to the rule of thu"b of >)4 ie currentassets double the current liabilities isconsidered to be satisfactory Then e observe

>=46 >=49 >=4<=

=>

=9

=5

=

4

4>49

44B4=

=7=B5 =B9 =B

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Kuic' Ratio

Interpenetration: Observing the data Daburhas higher ?uic' ratio than %2 #hich denotes anedge over %2 and good "anagerial eciency ofDabur This reHects on the nu"ber of operation

cycles of Dabur being "ore than %2

>=46 >=49 >=4<=

=>

=9

=5

=

4

4>

=7B

=55

=

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Cash Ratio

Interpenetration: /y co"paring the trends of both theco"panies it is clearly visible %2 is sho#ing an increasingtrend in gro#th of cash ratio #hich indicates a positive signfor the Co"pany but Dabur is also not lac'ing behind as thechanges in provision for utilising the cash has been

i"provised

>=46 >=49 >=4<=

==<

=4

=4<

=>

=><

=6

==5

=49

==6

=>>

=>5 =>

DA/R

%2

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 Ratio

Interpenetration: Observing the data %2Co"pany asset turnover is "ore the DaburCo"pany%igher turnover ratios "ean theCo"pany is using its assets "ore eciently

>=46 >=49 >=4<=

>

9

5

4=

4>

>67 > >>>

7B7

5>

7B7

DA/R

%2

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Debtors turnover Ratio

Interpenetration: Dabur Co"pany the debtorturnover ratio is decreasing year to year Thissho#s that Co"pany is not utili:ing its debtor!seciency in co"pression to %2 co"pany

>=46 >=49 >=4<=

<

4=4<

>=

><

6=

6<9=

9<

449 459 4594

6946 66756

DA/R

%2

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Inventory Turnover Ratio

Interpenetration: Observing the data%2 Co"pany Inventory turnover is "orethe Dabur Co"panyThis sho#s %2Co"pany is eciency of "anage"ent toconvert the inventory into cash

>=46 >=49 >=4<=

=&>=&9

=&5

=&

4

4&>

4&9

4&4B4&=

=&7

=&B5   =&B9   =&B

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Debt to -?uity Ratio

Interpenetration: Observing the datathat %2 Co"pany higher debt to e?uityratio are considered "ore ris'y inco"pression to Dabur Co"pany

>=46 >=49 >=4<=

==>

==9

==5

==

=4

=4>

=49

=45

=4<

==>

==5

= = =

DA/R

%2

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-?uity Ratio

Interpenetration:In general( higher e?uityratios are typically favorable for co"panies so

e?uity  ratio of %2 co"pany "orefavorable in co"pression to Dabur co"pany

>=46 >=49 >=4<=

==4==>

==6

==9

==<

==5

==B==

==7

==9==6

==6

====B

==5

DA/R

%2

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2ong Ter" Debt Ratio to -?uity Ratio

Interpretation: 1Observing the data Dabur & %2that 2ong Ter" Debt Ratio to -?uity Ratio is si"ilarboth the co"pany "eans both the co"pany not

used long ter" debt

>=46 >=49 >=4<=

=>

=9

=5

=

4

= = == = =

DA/R

%2

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-in#in>s

?WOT AnalysisDabur is a MCG co"pany that"anufactures and "ar'ets ayurvedic andnatural healthcare products Theco"pany is one of the largest Indianconsu"er goods co"pany Strong "ar'etposition i"parts distinct co"petitive

advantage to Dabur and facilitatesrevenue and business e;pansion gro#thprospects for the co"pany

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  *+&+L -nal.sis/ 0

 

Dabur India 2i"ited has "ar'ed its presence#ith signi8cant achieve"ents and todayco""ands a "ar'et leadership status Therestory of success is based on dedication tonature( corporate and process hygiene(dyna"ic leadership and co""it"ent to theirpartners and sta'eholders The results of theirpolicies and initiatives spea' for the"

 The co"pany has 'ept an eye on ne#

generations of custo"ers #ith a range ofproducts that cater to a "odern lifestyle( #hile"anaging not to alienate earlier generations ofloyal custo"ers

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Ratio Analysis:1As analy:ed Dabur!s perfor"ance in

co"parison #ith %2 is "uch better as Daburis able to utili:e its #or'ing capital in a "uchecient "anner and therefore is reducing thecycle ti"e and increasing the nu"ber of cycles

throughout the year The 2ead Ti"e for Daburis less and therefore the pro8ts are high Thereis no doubt that both co"panies areperfor"ing really close to each other( but allthe 8nancials and the analysis put together(

Dabur!s eciency spea's for itself

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CONCL&?ION

 After analy:ing the 8nancial state"ents of the Daburby the help of various ratios( I observed that the trendof gro#th is positive

 

  Dabur has strong perfor"ance #ith robust top linegro#th and high ?uality earnings in all businessseg"ents The perfor"ance is "ore satisfying #henvie#ed in the light of the challenging businessenviron"ent of the Ayurvedic industry( ,har"a( MCG(ood in the e;port and do"estic "ar'ets

 

Current ratio has continuously increased but theCo"pany needs to raise "ore of its current assets and?uic' assets so that it can ful8ll all its obligations and

can raise the a"ount of #or'ing capital for short+ ter"invest"ent -arnings per share have increased #hich

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?">>estions

  In "y opinion and to the best of "y'no#ledge( it can be said that although theCo"pany has fared up #ell on basis of operationsin the current but the 8nancial status of theCo"pany is not #ell So in order to increase theperfor"ance of the Co"pany there should be anade?uate internal control syste" co""ensurate#ith the si:e of the Co"pany and the nature ofits business #ith regard to purchases of inventory

and 8;ed assets and the sale of goods andservices %o#ever the #or'ing capital of theCo"pany is in a positive #hich is a good sign andthe only #ea' lin' of the Co"pany as a result of

increase in short ter" loans

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 T