A Comprehensive Study on Cash Management Services (CMS)

in Berger paints India Ltd-British Paints Division

Under the guidance of: Prepared By:Mr. M.A. Mateen Nishant GuptaVP (F&A),BPIL MBA 3rd Sem

FMS(BHU) .

.

Flow Of Presentation

Findings

Industry Profile

Suggestions

SWOT Analysis

Company Profile

Analysis Of Financial Statement

Research Methodology

Industry Profile

• The Market Size of Indian paint Industry is Rs. 170bn in value terms.

• Per Capita Consumption of Paints in India – 800-900gms as compared to 15-25kg in developed Countries.

• Growth rate in Organized sector 15-17%p.a.

HISTORY• Genesis in 1919 in united kingdom

• Name changed from British Paints India Ltd to Berger paints India Ltd in 1983.

• Berger Paints goes on to become India’s second largest paint company with its four SBU’s LEWIS BERGER And RAJDOOT, BAICL and NEPAL DIVISION

• BERGER PAINTS takes over all assets and liabilities of RAJDOOT SBU in 1999.

•PRESENT in INDIA as BERGER PAINTS INDIA LIMITED – LEWIS BERGER & BRITISH PAINTS

(NOW INDIA’S SECOND LARGEST PAINT COMPANY)

•BERGER BECKER COATINGS PRIVATE LIMITED

•INTERNATIONAL OPERATIONS IN : NEPAL, BANGLADESH, RUSSIA,

POLAND

Company Profile

INFRASTRUCTURE

• HEAD OFFICE of BRITISH PAINTS is LOCATED IN NEW DELHI.

•FACTORIES IN SIKANDRABAD, SAMBA, DEVLA & SURAJPUR.

•HAVE 37 DEPOTS PRESENT IN 6 REGIONS:

President

V.P. (Production)

V.P.

(Purchase)V.P. (Sales & Marketing)

H.R. Manager

BPIL

Chairman

MD

V.P. (Finance & Accounts)

Commercial Manager

Manager ISD Chief Manager F&A

Sr. Manager Factory Audit Head

Organizational Structure

Financial AnalysisRatio and Statistics 2009-2010 2008-2009 2007-2008

Liquidity Ratio

Current Ratio 1.81 1.34 1.15

Quick Ratio 0.89 1.10 1.08

Profitability Ratio

Gross Profit Margin 8.88 7.08 8.69

Net Profit Margin 7.02 5.79 6.79

Leverage Ratio 2009-2010 2008-2009 2007-2008

Debt equity Ratio 0.04 0.19 0.35

Equity Ratio 0.96 0.84 0.74

Interest Coverage Ratio

64times 10times 12times

Activity Ratio

Inventory Turnover Ratio

6.09 6.64 5.92

Debtors Turnover Ratio

8.76 8.92 8.87

• Second Largest Paint Company in India.

• Large distribution Network.

• Uses push strategy as the only promotional tool.

• Low sell of industrial paints

• Increasing Per Capita consumption of paint

• Growth rate 0f 15-17%.

• Stiff Competition from other paint companies.

• Entry of global Players.

S W

OT

CONCEPT OF CASH MANAGEMENT SERVICES

Cash management services (CMS) are generally offered by banks for speedy collection and faster realization of cheques to a business firm.

Successful cash management involves not only avoiding insolvency, but also reducing days in account receivables (AR), increasing collection rates

Cash Management Services offered by different banks:

Cash Concentration Services:

Prevents funds in accounts from being idle and not earning sufficient interest .

Primary bank "pull" the money from other accounts into a single interest-bearing bank account.

Automated Clearing House:

This is an electronic system used to transfer funds between banks.

Sweep Accounts:

Excess funds from a company's bank accounts are automatically moved into a money market mutual fund overnight and moved back the next morning.

Zero Balance Accounting:

This allows the company to look at individual statements for each unit.

Lockbox services: • Instead of mailing checks to the firm, customers mail checks to a nearby

P.O. Box. • A commercial bank collects and deposits the checks.• This reduces mail float, processing float.

Research

Research MethodologyResearch Objective:

• To observe any improvement in terms of Cheque Realization Period after implementation of CMS

• To compare the CMS service provided by two different Banks to depots

Primary Objectives

Research design:The research design used is Experimental.Selecting the Samples through Convenience.Measuring the responses before exposing it to the Experiment.Exposing the respondents to the Experiment.

Tools Used:Tool Used is Descriptive Statistics. Types of Data collected:Primary Data: Company’s Internal ReportsSecondary Data: Secondary data collected from various banks websites.

Sampling: Convenience Sampling

Population: All the Cheques BPIL received in the month of Feb11 and March 11

Sample size: 582 (the Cheque realization from 3 Depots have been taken as samples)

Location: British paints India limited ( Head office New Delhi)

Duration: 2 months

Data: Internal records

Comparative study between two different banks provided to two different Depots

1) Ajmeri Gate Depot-ICICI Bank2) Sultanpur Depot- IDBI Bank

NO. OF CHEQUES

FEBMARCH

80140

•CMS service is provided by ICICI Bank•Total No. of cheques studied in the month of Feb and March

AJMERI GATE DEPOT

Local Cheques: In the month of Feb. & March 2011 Clearance of cheques was done in 2.36 days on an avg.

No. of cheques

Favourable

201

19

NO. OF CHEQUES

FEBMARCH

50

82

•CMS service is provided by IDBI Bank•Total No. of cheques studied in the month of Feb 2011 and March 2011

SULTANPUR DEPOT

No. of cheques

Favourable

116

16

Local Cheques: In the month of Feb. & March 2011 Clearance of cheques was done in 2.92 days on an avg.

IDBI BANK CMS SERVICE Charges

Local clearing charges Rs.0.10/ Rs.1000

Upcountry cheque clearing charges Rs.0.08/ Rs.1000

Cheque return charges Rs. 50/instrument

Cheque collection fee Rs. 300 per centre

Outside network collection cheque Rs. 2.50/Rs.1000

No minimum charges applicable

ICICI BANK CMS SERVICE Charges

Local clearing charges Rs.0.07/ Rs.1000, Min. Charges NIL

Upcountry cheque clearing charges Rs.0.08/ Rs.1000, Min. Charge Rs 20

Cheque return charges Rs. 75/instrument

Cheque collection fee Rs. 300 per centre

Outside network collection cheque Rs. 2.00/Rs.1000

On all upcountry there is a minimum charge of Rs. 20

Comprehensive analysis of CMS and non-CMS in Jammu Depot

In Jammu depot CMS service from SBI Bank is implemented in Jan end 2011

CMS implementation affects the floating* time of cheques

*Float time is time taken to realize the cheque amount

Jammu Depot: In the month of Jan 2011: Avg. Clearance days of cheques was 3.18 days

In the Month of March 2011: Avg. clearance days of cheques was 2.26 days after availing of CMS from SBI

Jan March0

0.5

1

1.5

2

2.5

3

3.5

Avg. Float Days

Avg Float Days

MARCH

Favourable

unfavourable

9

106

JAN

Favourable

Unfavourable

17

98

Out of total sample of 115 cheques in each case, no. of unfavorable cases in the month of January 2011 is more in comparison to March 2011

After implementation of CMS in Jammu depot realization of cheques has become faster.

CMS is cost effective

Service provided by ICICI Bank is at par to the services provided by IDBI Bank

MIS Provided by CMS are remarkable

Company should continue with the CMS because of it’s benefits.

Company can demand for better services (in terms of Outstation Cheque realization duration) from bank’s end.

If company desire to reduce work load from the employees then company can continue MIS services of Banks. It ease the reconciliation of statements

If the objective of Centralized control is to be fulfilled then company should continue with CMS service of bank with better monitoring.

Suggestions

LIMITATIONS

•No Communication with Banks.•Small sample size.•Not easy availability of depots records.

REFERENCES:

Financial Management I.M.PandeyMarketing Research Naresh K Malhortrawww.axisbamk.comwww.rbi.gov.inwww.wikipedia.comwww.mamagementparadise.comwww.icicibank.comwww.idbibank.comwww.domain-b.com