Fm Final Report

7/30/2019 Fm Final Report

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A project report on

GNFC

Working capital

Submitted by:

Mayuri jadav 44

Minaxi solanki 25

Priti sinha 34


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INTRODUCTION

Gujarat Narmada Valley Fertilizers Company Ltd. (GNFC), is a joint sector enterprisepromoted by

the Government of Gujarat and the Gujarat State Fertilizer Company Ltd.(GSFC). It was set up in

Bharuch, Gujarat in 1976. Located at Bharuch in an extremely prosperous industrial belt, GNFC draws

on the resources of the natural wealth of the land as well as the industrially rich reserves of the area.

GNFC started its manufacturing and marketing operations by setting up in 1982, one of the world's

largest single-stream ammonia-urea fertilizer complexes. Over the next few years, GNFC successfully

commissioned different projects - in fields as diverse as chemicals, fertilizers and electronics.

Since inception, GNFC has worked towards an extensive growth as a corporation. A growth which

respects the environment and springs from the progressive vision of GNFC.

GNFC today has extended its profile much beyond fertilizers through a process of horizontal

integration. Chemicals/Petrochemicals, Energy Sector, Electronics/Telecommunications and

Information Technology form ambitious and challenging additions to its corporate portfolio. GNFC has

an enterprising, strategic view towards expansion and diversification.

VISION STATEMENT

To be a technology driven, environmentally responsible Joint Sector Company manufacturing

Fertilizers, Commodity and Specialty Chemicals maintaining highest standards of operational

excellence and innovation for creating sustainable value for all stakeholders

MISSION STATEMENT

We shall -

be the leading provider of Chemicals and Agricultural inputs through adoption of State of the Art

Technologies and Business Processes;

have a firm commitment to quality, environment, health and safety;

enrich human resources and promote teamwork, innovativeness and integrity;

Achieve sustainable economic growth based on corporate excellence driven by ethical business

practices, professionalism, dynamism and social responsibility.


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ACHIEVEMENTS

Set up the world's largest single stream, fuel oil based Ammonia - Urea plant

All fertilizers under the brand name of Narmada, along with extensive support activities, have

been well accepted by the country's farmer community.

India's largest producer of Formic Acid, Acetic acid and Methanol.

India's only manufacturer of Glacial Acetic Acid through the cutting-edge Methanol route.

The only manufacturer of Toluene Di-isocyanate in South East Asia.

Record capacity utilizations in all plants, defying the vintage through ingeniously innovative

maintenance measures.

Development of the first indigenous, eco-friendly technology for H2S removal, CATSOL, a much

awarded product of the Company's R&D labs.

1. Calculation of Gross Working Capital

Gross Working Capital = Current Assets

Rs. In Lac

Sources of funds 2006-07 2007-08 2008-09 2009-10

Current assets

Inventories 38,846.52 38,599.79 43,075.71 40,503.38

Sundry debtors 60,527.55 38,968.35 28,871.65 1,668.11

Cash and bank balance 13,047.91 15,141.34 5,541.39 32,339.02

Interest accrued 141.48 447.65 0.00 0.00

Govt. of India Fertilizer Bonds 0.00 0.00 24,424.34 0.00

Loan and advances 28,465.60 27,240.05 21,725.62 25,385.93

Gross working capital 1,41,029.06 1,20,397.18 1,23,638.71 99,896.44

From the last 4 years data, we found that 2009-10 it decreases the value of gross working capital

is highest in the year 2006-07 i.e. 1, 41,029.06 but in the year 2009-10, it is 99,896.44 which show

that GNFC made lower investment in current assets and thereby was incapable to meet its current

liabilities satisfactorily.


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2. Calculation of Net Working Capital

Net Working Capital = Current Asset Current liabilities

Rs. In Lac

Sources of funds 2006-07 2007-08 2008-09 2009-10

Current assetsInventories 38,846.52 38,599.79 43,075.71 40,503.38

Sundry debtors 60,527.55 38,968.35 28,871.65 1,668.11

Cash and bank balance 13,047.91 15,141.34 5,541.39 32,339.02

Interest accrued 141.48 447.65 0.00 0.00

Govt. of India Fertilizer Bonds 0.00 0.00 24,424.34 0.00

Loan and advances 28,465.60 27,240.05 21,725.62 25,385.93

(A) Total Current Assets 1,41,029.06 1,20,397.18 1,23,638.71 99,896.44

Current liabilities

Liabilities 44,245.09 35,272.20 23,759.99 28,147.07

Provisions 9,723.65 13,594.99 13,176.61 14,158.65

(B)Total Current Liabilities 53,968.74 48,867.19 36,936.60 42,305.72

Net Working Capital

(AB) 87,060.32 71,529.99 86,702.11 57,590.72

Net Working Capital can be positive or negative. For GNFC, it is highest in the year 2006-07 i.e.

87,060.32 which decrease in 2009-10 by 57,590.72. So it shows negative sign thereby indicating

that GNFC was unable to meet its current obligations since its current liabilities exceed current

assets.

WORKING CAPITAL POSITION

1. Net Working Capital Ratio:

Net Working Capital Ratio = Net Working Capital

Total Assets

Rs. In Lac

Particulars 2006-07 2007-08 2008-09 2009-10

Net Working Capital 87,060.32 71,529.99 86,702.11 57,590.72


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Total Assets 2,54,536.78 2,53,341.22 2,88,554.64 3,19,811.9

Net Working Capital Ratio 0.34 0.28 0.30 0.18

Working capital is a measure of the margin of protection for current creditors. It reflects the ability

to finance current operations. Relating the level of sales arising from operations to the underlying

working capital measures how efficiently working capital is employed. A low ratio may indicate an

inefficient use of working capital while a very high ratio often signifies overtrading - a vulnerable

position for creditors.

As shown in the calculation, net working capital is lowest in 2009-10 compare to all previous

years. That means company has less working capital and it is not able to meet its current

obligation. So we can say that the last year working capital position is not good.

2. Investment in inventories:

Rs. In Lac

Particulars 2006-07 2007-08 2008-09 2009-10

Stores & Spares 19,342.98 19,966.31 23,447.60 26,867.56

Raw Material 5,269.92 5,774.87 6,406.32 10,133.78

Work in Process 580.18 3,447.03 1,968.82 252.00

Finished Goods 13,653.44 9,411.58 11,252.97 3250.04

Total Inventories 38,846.52 38,599.79 43,075.71 40,503.38

we can say that the total investment in inventories is decreased year by year except 2008-09, but

in 2009-10 it is decreased again which showing lower investment in inventory indicating less

blocking of current capital.

CALCULATION OF OPERATING CYCLE OF GNFC

1. Inventory Conversion Period

The inventory conversion is the sum of raw material conversion period, work in process and

finished goods conversion period:

Raw material conversion period is the time period between receiving the raw material and

sending them for production. It is the period of stocking the raw materials for usage.

Work-in-progress conversion period is the time period when the raw materials are

received for production and the time for their dispatch.


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Finished goods conversion period is the time of storage of finished goods in the

warehouse until they are sold.

ICP = RMCP + WIPCP + FGCP

I) Raw Material Conversion Period (RMCP)RMCP = Average raw material inventory

Raw material consumption per day

Raw material consumption per day = Raw material consumption / 360

Average raw material inventory = (opening stock of RM + closing stock of RM)/2

RMCP FOR FOUR YEARS:

Particulars 2006-07 2007-08 2008-09 2009-10

Average raw material inventory 5274.77 5522.39 6090.59 8270.05

Raw material consumption per day 292.01 341.99 343.35 346.56

RMCP (in days) 18 16 18 24

II) Work in Process Conversion Period (WIPCP)

WIPCP = Average work in process inventory

Cost of production per day

Average work in process inventory = (Opening WIP + Closing WIP) / 2

Cost of production per day = (Raw material consumed + Power, fuel and other utilities +

Stores chemicals + Opening WIP Closing WIP) / 360

WIPCP FOR FOUR YEARS:

Particulars 2006-07 2007-08 2008-09 2009-10

Average work in process inventory 1,793.74 2,013.61 2,707.93 1,110.41

Cost of production per day 382.39 439.89 463.35 459.17

WIPCP (in days) 5 5 6 2


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III) Finished Goods Conversion Period (FGCP)

FGCP = Average Finished goods inventory

Cost of goods sold per day

FGCP FOR LAST FOUR YEARS:

Particulars 2006-07 2007-08 2008-09 2009-10

Average Finished goods inventory 8,795.65 11,532.51 10,322.28 7,251.51

Cost of goods sold per day 685.36 854.79 752.38 692.47

FGCP (in days) 15 13 14 10

ICP FOR LAST FOUR YEARS:

Particulars 2006-07 2007-08 2008-09 2009-10

Raw Material Conversion Period 18 16 18 24

Work in Process Conversion Period 5 5 6 2

Finished Goods Conversion Period 15 13 14 10

Inventory Conversion Period(in days) 38 34 38 36

The inventory conversion period is the time required to obtain materials for a product,

manufacture it, and sell it.

From the above chart, we can see that GNFC is better in last year in converting the inventory

into finished goods. But raw material conversion period need to be improved.

2. Debtors Conversion Period (DCP):

Debtors Conversion Period = Debtors * 360

Credit Sales


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Particulars 2006-07 2007-08 2008-09 2009-10

Debtors 60,527.55 38,968.35 28,871.65 1,668.11

Credit Sales per day 760.91 953.86 811.13 726.24

DCP(in days) 80 41 36 2

The debtors conversion period represents the length of time required to collect the sales

receipts. It can be called process of cash inflow.

From the above calculation, the conversion periods are fluctuating. It was highest in 2006-07 i.e.

80 days which affects adversely to the firm. In 2009-10, it decreases from 80 days to 2 days which

is fair & good for GNFC.

3. Gross Operating Cycle (GOC):

Gross Operating Cycle = Inventory conversion period + Debtors conversion period

Particulars 2006-07 2007-08 2008-09 2009-10

Inventory Conversion period(in days) 38 34 38 36

Debtors conversion period(in days) 80 41 36 2

GOC(in days) 118 75 74 38

The gross operating cycle of a firm is equal to the length of the inventories and receivables

conversion periods.From the above calculation, we can say that gross operating cycle is highest in

2006-07 i.e. 118 days because of high collection period. However in 2009-10, it is decreased to 38days because of low collection period and low conversion period which is a good sign.

4. Payable Deferred Payment (PDP):

Payable Deferred Payment = Creditors * 360

Credit Purchase

Credit Purchase = Raw material consumed + power, fuel and other utilities + stores

And chemicals + packing material + purchase of good for sale +

Closing stock of raw material + closing stock of stores and spares-

(Opening stock of RM + Opening stock of stores and spares)/360


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Particulars 2006-07 2007-08 2008-09 2009-10

Creditors 39,389.51 30,174.94 17,018.55 22,752.84

Credit Purchase per day 511.99 645.36 569.10 501.87

PDP(in days) 77 47 30 45

Payable deferred payment is the time that lapse between the dates of various resources received

on credit and the date when payment is made The days are lowest in the year 2008-09 i.e. 30

days & in the year 2009-10, it is increased to 45 days which shows liberal collection policy of

creditors towards company.

5. Net Operating Cycle (NOC):

Net Operating Cycle = Gross Operating Cycle Payable Deferred Period

Particulars 2006-07 2007-08 2008-09 2009-10

Gross Operating Cycle 118 75 74 38

Payable Deferred Period 77 47 30 45

Net Operating Cycle (in days) 41 28 44 (7)

The difference between gross operating cycle and payable deferred period is known as net

operating cycle. The net operating cycle is 44 days in 2008-09. However in 2009-10, the cycle

days are again reduced to a noticeable level which was a good sign showing better management

of funds by the firm.


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FINDINGS

The value of gross working capital is highest in the year 2006-07 i.e. 1, 41,029.06 but in the

year 2009-10 it is 99,896.44 which show that GNFC made lower investment in current

assets.

Net working capital of GNFC was better in 2008-09 in comparison to 2007-08 but has

decreased in 2009-10 showing incapability of company to meet its current requirements.

Net working capital position of GNFC has deteriorated from 2008-09 to 2009-10 thereby

indicating poor working capital management.

Inventory conversion period for GNFC is better in last year in converting the inventory into

finished goods. But raw material conversion period need to be improved.

Payable deferred periods are lowest in the year 2008-09 i.e. 30 days & in the year 2009-10,

it is increased to 45 days which shows liberal collection policy of creditors towardscompany.

Gross operating cycle is highest in 2006-07 i.e. 118 days because of high collection period.

However in 2009-10, it is decreased to 38 days because of low collection period and low

conversion period which is a good sign.

The net operating cycle is 44 days in 2008-09. However in 2009-10, the cycle

days are again reduced to a noticeable level which was a good sign showing better

management of funds by the firm.


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BALANCESHEET (Rs. In Lacks)

PARTICULARS 31.3.2010 31.3.2009 31.3.2008 31.3.2007 31.3.2006

SOURCE OF

FUNDS:

SH.HOLDERS

FUNDS:

Share capital 15541.88 15543.74 15543.74 15543.74 14647.62

Res & surplus 192363.00 185867.88 169026.13 141518.60 103080.80

207904.88 201411.62 184569.87 157062.34 117728.42

Loan funds:

Secured loans 29000.53 10284.95 31046.38 34836.37 26761.36

Unsecured loans 26505.00 25305.00 305.00 322.11 475.17

55505.53 35589.95 31351.38 35158.48 27236.53

Deferred Tax:

Deferred tax liab 25526.32 26305.75 23598.65 24033.56 18765.00

Less: deferred

tax, assets

2479.09 2850.22 2002.18 836.07 759.49

23047.23 23455.53 21569.47 23197.49 18005.51

Total 286457.64 260457.10 237517.72 215418.31 162970.46

Application

funds:

Fixed Assets:

Gross block 308424.97 302799.58 275053.07 267728.77 213788.79

Less: dept. 191489.85 179851.06 168030.19 157096.07 128679.18

Net block 116935.12 122948.52 107022.88 110632.68 85109.61

Capital W.I.P 102980.34 41967.41 25921.16 2875.04 4862.82

219915.46 164915.93 132944.04 113507.72 89972.43

Investment: 8951.46 33263.4 33043.69 14850.27 21820.27

Current Assets,

Loans & Adv.

Interest Accrued

On Investments

0.00 0.00 447.65 141.48 141.48

Inventories 40503.38 43075.71 38599.79 38846.52 26957.87Sundry debtors 1668.11 28871.65 38968.35 60527.55 43012.40

Cash & bank

balances

32339.02 5541.39 15141.34 13047.91 5501.95

Loan & advance 25385.93 21725.62 27240.05 28465.60 12663.63

99896.44 123638.71 120397.18 141029.06 88277.38

Less: current

liabilities &

provision

Current liabilities 28147.07 23759.99 35272.20 44245.09 26295.87Provision 14158.65 13176.61 13594.99 9723.65 10902.56

42305.72 36936.60 48897.19 53968.74 37198.43

Net current 57590.72 62277.77 71529.99 87060.32 51078.95


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assets

Miscellaneous

Expenditure:

VRS

compensation

- - - - 98.81

Premium on

repayment

- - - - -

98.81

Total 286457.64 260457.10 237517.72 215418.31 162970.46

PROFIT & LOSS A/Cs (Rs. In Lacks)

Particulars 2009-10 2008-09 2007-08 2006-07 2005-06INCOME:

Sales & ser 271277.75 306228.02 365344.17 297666.61 228133.38

Less: excise duty 9833.12 14222.41 21952.96 21739.87 13375.67

Sales (net) 261444.63 292005.61 343391.21 273926.74 214757.71

Other income 8628.26 6534.06 4916.63 3534.35 7995.62

270072.89 298539.67 348323.66 277459.43 223280.72

EXPENDITURE:

Purchase 6264.59 30641.17 63665.56 40212.52 24667.72

Manufacturing exp 177580.75 181360.00 177770.92 148964.90 116146.61Stock of finished

goods & stock in

process

9719.75 (360.18) 1375.01 (5077.09) (342.26)


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Marketing, adm &

other exp.

20606.90 14544.48 17751.56 15313.18 12870.76

Personal exp. 19682.71 22131.15 19016.67 16886.56 13305.02

Interest (net) 2338.20 2692.18 70.77 1263.66 3624.00

Depreciation 11695.92 11972.57 11051.70 10957.02 8859.43

Prior period adj. - - - (6.06)

Research &development exp.

195.39 - - - -

248084.21 263169.22 290702.19 228520.75 178625.22

RPOFIT BEFORE

TAX

21988.68 35370.45 57621.47 48938.68 44655.50

Less: provision for

current tax

10013.24 10527.66 20797.27 17444.74 15968.00

Add: provision for

deferred tax

(408.30) 1859.06 (681.93) 564.88 1167.00

Less: provision forPBT

0.00 232.00 222.10 192.25 382.20

Add: provision for

taxation

0.00 0.00 4.27 780.08 -

PROFIT AFTER

TAX

12383.74 22751.73 37288.30 32646.65 29472.30

Add: bal from

previous year

49164.41 52322.23 47761.80 35977.83 33603.86

Add: P & L A/C - - - 6678.86 -

Amount available for

appropriation

61548.15 75073.96 85050.10 75489.67 63076.16

APPROPRIATION

General reserved 10000.00 20000.00 25000.00 20000.00 20000.00

Proposed dividend 5051.11 5051.11 6605.30 6605.30 6225.24

Tax On Dividend 838.93 858.44 1125.57 1122.57 873.09

Balance Carried to

Balance Sheet

45658.11 49164.41 52322.23 47761.80 35977.83

61548.15 75073.96 85050.10 75489.67 63076.16

Documents

Fm Final Report