Report of Working Capital at Alembic Ltd

8/2/2019 Report of Working Capital at Alembic Ltd.

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A

COMPREHENSIVE PROJECT REPORT

ON

“WORKING CAPITAL”

Submitted to

Dr. J. K. Patel Institute of Management

IN PARTIAL FULFILLMENT OF THE

REQUIREMENT OF THE AWARD FOR THE DEGREE OF

MASTER OF BUSINESS ADMINISTRATION

Under

Gujarat Technological University

UNDER THE GUIDANCE OF

Faculty Guide

PROF. DEVAL NIRMAL

Submitted by

JIMIT M PATEL

Enrollment No.:107110592130

M.B.A - I, SEMESTER-II


M.B.A PROGRAMME

Affiliated to Gujarat Technological University

Ahmadabad.



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CERTIFICATE

This is to certify that Mr. JIMIT M PATEL, students of Master of Business

Administration (Batch 2010-2012) at Dr. J. K. Patel Institute of Management,

Vadodara have undertaken a Project Titled “WORKING CAPITAL” in partial

fulfillment of 2 years full time MBA programme of Gujarat Technological

University, Ahmedabad. The Summer Internship Project has been undertaken

under the guidance of Prof. DEVAL NIRMAL, faculty of Dr. J. K. Patel

Institute of Management.

This is also to ascertain that this project has been prepared only for the award of

Master of Business Administration degree and has not been submitted for any

other purpose.

Prof. Dr.Abhijeet Chatterjee

Deval Nirmal Director

Date:

Place:



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PREFACE

Summer Placements are a crucial aspect of a Management student’s life. At the MBA

Programme conducted under the aegis of Gujarat Technological University, Ahmadabad,

summer placements aim to give the students a chance to apply in actual practice, the

fundamentals that they learnt in the first two semester of the programme. Graduate students

with no or minimal work-experience step into an organisation and get their first taste of

working life. The students get an exposure to all the four functions of management – human

resources, finance, marketing and production. This enables students to choose or rather,

reject a specialization, e.g., the student may have scored well in Marketing Management in

the exams, but when confronted by the realities of the marketing professionals, the student

will understand exactly where he stands and what he lacks, in terms of his marketing skills.

In this report on my summer placement at ALEMBIC LTD., I have presented my

understanding of the working of Alembic Ltd., from a management-student’s perspective.



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ACKNOWLEDGEMENT

I am thankful to Dr. ABHIJEET CHARTIJEE, Director, Of J.K.PATEL INSTITUTE OF

MANAGEMENT for giving me an opportunity to work with ALEMBIC LIMITED for my“Summer Internship Project”.

This report would not have been possible but for the kind support and expert guidance of Mr.

Himanshu Jani (Senior HR. Manager) & Mr. Rajkumar Baheti (President Finance).The task

of understanding the intricacies of management in practice was made easy by the generous

help extended by all the employees of Alembic Ltd.

I am also thankful to Prof. Deval Nirmal for him valuable advice and ideas which made my

work successful. Without her encourangement I would not have been able to complete my

project.

No Task is a single man’s effort cooperation and coordination of various people at various

places goes into successful implementation. It is great pleasure to have the opportunity to

extend my heart-felt thanks to everybody who helped me through the successful completion

of this project.



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TABLE OF CONTENTS

Sr.NO CONTENTS PAGE

NO

1 PREFACE 3

2 ACKNOWLEDGEMENTS 4

3 LITERATURE REVIEW 7

4 OBJECTIVE OF STUDY 19

5 INTRODUCTION OF ALEMBIC LTD. 22

6 FINANCE DEPARTMENT 37

7 RESEARCH METHODOLOGY 41

8 DATA ANALYSIS 43

9 FINDINGS & OBSERVATION 60

10 SUGGESIONS 62

11 LIMITATION OF STUDY 61

12 CONCLUSION 63

13 BIBLIOGRAPHY 64

14 ANNEXTURE 65



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TABLE OF CHART

Sr.NO CONTENTS PAGE NO

1 CURRENT ASSETS 46

2 DEBTORS 47

3 INVENTORY 48

4 LOANS & ADVANCES 49

5 CASH & BANK BALANCES 50

6 CURRENT LIABILITIES 51

7 PROVISIONS 52

8 NET WORKING CAPITAL 53

RATIOS 54

1 CURRENT RATIO 54

2 QUICK RATIO 55

3 WORKING CAPITAL

TURNOVER RATIO

58



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LITERATURE REVIEW

Review

A literature review can be a precursor in the introduction of research paper, or it can

be an entire paper in itself, often the first stage of large research projects, allowing the

supervisor to ascertain that the student is on the correct path.

A literature Review is a critical and in depth evaluation of previous research. It is a

summary and synopsis of a particular area of research, allowing anybody reading the paper

to establish why you are pursuing this particular research program. A good literature review

expands upon the reasons behind selecting a particular research question.

WORKING CAPITAL MANAGEMENT:-

Working capital management involves the relationship between a firm's short-term assets and

its short-term liabilities. The goal of working capital management is to ensure that a firm is

able to continue its operations and that it has sufficient ability to satisfy both maturing short-

term debt and upcoming operational expenses. The management of working capital involves

managing inventories, accounts receivable and payable, and cash.

Working capital management is concerned with the problems that arise in attempting to

manage the current assets and current liabilities & the inter-relationship that exist between

them.

The term current assets refers to those assets which in the ordinary course of business can be,

or will be turned into cash within one year without undergoing a diminution in value &

without disrupting the operations of the firm. The major current assets are cash, marketable

securities, accounts receivables and inventory.

The term current liabilities are those liabilities, which are intended at their inception to be

paid in the ordinary course of business, within a year, out of the current assets or earning of



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the concern. The basis current liabilities are accounts payable, bill payables, bank overdraft

& outstanding expenses.

The goal of working capital management is to manage the firm’s current assets & current

liabilities in such a way that satisfactory level of working capital is maintained. The current

assets should be large enough to cover its current liabilities in order to ensure a reasonable

margin of safety. “The interaction between current assets & current liabilities is therefore, the

main theme of the theory of working capital management.”

CONCEPT OF WORKING CAPITAL:-

There are two concepts of working capital.

1. Gross Working Capital

2. Net Working Capital

GROSS WORKING CAPITAL

The term “gross working capital” also referred to as working capital, means the total current

assets.

Gross working capital refers to the firm’s investment in current assets. Current assets are the

assets which can be converted into cash within an accounting year and include cash, short

term securities, debtors (accounts receivables or book debts), and bill receivables and stock

(inventory).



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Working Capital Financing in Alembic Ltd.

In Alembic Ltd, working capital planning is done by the finance Manager. The working capital planning

is done on four occasions i.e. Yearly, Monthly, Weekly and Daily basis. First the total

working capital requirement is assessed on yearly basis. On the basis of yearly planning, the

company approaches its bankers for increase or modifications in the working capital

facilities. Then the company makes the monthly working capital planning. This is done to

meet the working capital requirement of the coming month. Then the company makes a

working capital planning for the immediate week. Up to this level the working capital

planning is done by the finance manager. Then, on every evening he makes the financial

requirement of the next day and assign the execution of those works to the Accountant and

officers.

The data required for planning in Alembic Ltd Are as follows.

Yearly projected sales:-

The data is given by Managing Director and Marketing Manager to the Finance Manager.

Expansion plan of management.:-These data is given by the Managing Director and Directors.

Monthly projected sales.:-

This data is given by marketing manager to the Finance Manager

Monthly estimated purchase:-

.This data is given by Production Manager to the Finance Manager.

Monthly estimated salary, power bill , repair and maintenance and other directand indirect expenses.

This data is given by Production Manager to the Finance Manager.

Monthly estimated money receivable from debtors.:-

This data is given by Accountants to the Finance Manager.

Monthly estimated money payables to creditors.:-This data is given by Accountants to the Finance Manager. If there are much deviation in the

financial requirements during the year due to unexpected receipt of goods purchase orders

and increase in sales or change in credit terms, the yearly working capital requirement is

reviewed and modified. Accordingly monthly working capital planning is also changed.



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Operating Cycle Of Alembic Ltd.

Operating cycle of Working Capital

In any organization current assets are financed by current liabilities but all current assets cannot

be financed by current liabilities therefore there is need to maintain net working capital.

Why net working capital is needed can be understood by following cycle:

Operating cycle consists of four phases:

Utilization of cash by procurement of raw material

Conversation of raw material into finished goods.

Sale of finished goods to customers.

Collection of many from customers.

cash

Raw

materials

Finishedgoods

Debtors



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There is time lad between two successive phases. Procurement of raw material need some time

called as lead time. It can be short or long depends on availability of material. Each product has

processing time while converted from raw material to finished goods. Finished goods can reach to

customers by sales efforts lacks of proper sales efforts can lead to accumulation of inventory of

finished goods.

Realization of cash against the finished goods depends on time taken by the cycle to operate more

time to operate this cycle; more working capital is needed.

Average inventory

1) Inventory period = ------------------------------------------------

Annual COGS / 365

Average accounts receivable

2) Accounts receivable periods = ----------------------------------------------------

Annuals sales / 365

Averages accounts payable

3) Average payable periods = -----------------------------------------------------

Annual COGS / 365



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Operating Cycle of the Alembic Ltd.

NO. Particular Mar-

08

Mar-

09

Mar-

010

1 Raw material

storage Period

(Days)

29 14 10

2 Conversion period(Days)

9 8 21

3 Finished goods

storage (Days) 22

17 10

4 Advance collection

period (in Days)

9 7 23

5 Advance payment

period (in Days)

31 26 21

Length of

Operating Cycle

(Days) =

(1+2+3+4+5)

100 72 85



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NET WORKING CAPITAL

Net working capital refers to the difference between current assets & current liabilities.

Current liabilities are those claims of outsiders which are expected to mature for payment

within an accounting year and include creditors (account payables), bills payables and

outstanding expenses.

Working capital, also known as net working capital or NWC, is a financial metric which

represents operating liquidity available to a business

Working Capital = Current Assets − Current Liabilities

Net working capital can be positive or negative.

A positive working capital will arise when current assets exceed current liabilities.

A negative working capital occurs when current liabilities are in excess of current assets.

The liabilities of a business firm are measured by its ability to satisfy short term. The three

measures of a firm’s over all liability are:

1. Current Ratio

2. Acid Test Ratio / Quick Ratio

3. Net Working Ratio

Ratio analysis is a powerful tool of financial analysis. Ratios are calculated from current year

numbers and are then compared to previous years, other companies, the industry, or even the

economy to judge the performance of the company. Ratio analysis is predominately used by

proponents of fundamental analysis.



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Sources of Additional Working Capital

Sources of additional working capital include the following:

Existing cash reserves

Profits (when you secure it as cash!)

Payables (credit from suppliers)

New equity or loans from shareholders

Bank overdrafts or lines of credit

Long-term loans

If you have insufficient working capital and try to increase sales, you can easily over-stretch

the financial resources of the business. This is called overtrading. Early warning signs

include:

Pressure on existing cash

Exceptional cash generating activities e.g. offering high discounts for early cash payment

Bank overdraft exceeds authorized limit

Seeking greater overdrafts or lines of credit

Part-paying suppliers or other creditors

Paying bills in cash to secure additional supplies

Management pre-occupation with surviving rather than managing

Frequent short-term emergency requests to the bank (to help pay wages, pending receipt

of a cheque).



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DETERMENTS OF WORKING CAPITAL

A firm should plan its operation in such a way that it should have neither too much nor too

little working capital. The total working capital requirement is determined by a wide variety

of factors. These factors however affect from enterprise differently. They also vary from time

to time. In general the following factors are in valued in a proper assessment of quantum of

working capital management.

General nature of business

The working capital requirements of an enterprise are basically related to the conduct of

business.

The nature of their business is such that they have to maintain a sufficient amount of cash,

inventories and bad debts. They have necessarily to invest proportionately large amounts in

working capital. The manufacturing enterprise in a sense between these two extremes. The

industrial concerns fairly large amount of working capital through it varies from industry

depending on their assets structure.

Production cycle

Another factor which has a bearing on the quantum of working capital is the production cycle. The

term production or manufacturing cycle refers to the involved in the manufacturing of goods. It

covers the time span between the procurement of raw material and the completion of the

manufacturing process of manufacturing. In other words, there is some time gap before raw

materials becomes goods.

Business cycle

The working capital requirements are also determanined by the nature by the business cycle.

Business fluctuation lead to cyclical and seasonal changes which in cause a shift in the



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working capital position, particularly for temporary working capital requirements. The

variations in business condition may be in larea direction: Upward.

Phase when boom condition prevail and downsizing phase when the economic activity the

need for working capital is likely to.

Grow to cover the between increase sales and receipt of cash as well as to finance purchase

of addition material to the expansion of the level of activity.

In brief, business fluctuations the size of working capital mainly through the effect on

inventories. The responses of inventory to business to nature of the business cycle.

Production policy

The quantum of working capital is also determined by production policy. In case of business

the demand for produces is seasonal that is they are purchased during certain month of the

year. What kind of production policy should be follow in such assets? There are two options

open to such enterprise: either they confine their production only to periods when goods are

purchased or they follow a steady production policy throughout the year and produce goods

at a level to meet the peak demand. In the former case, there are serious production problem.

Credit policy

The credit policy relating to sales and purchase also affects the working capital. The credit

policy influences the requirement of working capital in two ways.

-through credit terms granted by the firm to its customers buyers of goods.

-Credit terms available to the firm from its creditors.

The credit terms granted to customers have a bearing on the magnitude of working capital by

determining the level of book debts. The credit sales result in higher book debts. Higher book

debts mean more working capital on the other, if liberal credit terms are available from the

suppliers of goods the need for working capital is less. The working capital requirements of a

business are thus affected by the terms of and sales and the role to the credit by a company in

its dealing with creditors and debtors.



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IMPORTANCE OF WORKING CAPITAL

Working capital is the life-blood and controlling nerve centre of a business.

It helps in forming important business strategies. Working capital helps to properly

manage and be flexible in taking important business decisions.

The adequacy of working capital contributes a lot in raising the credit standing

and always helps to take the advantage of any favorable opportunity e.g. purchasing raw

materials at a discount with minimum credit period.

Working capital is significant parameter in determining the performance of an

operating division or assessing the health of the project.



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PRAFOMA STATEMENT OF WORKING CAPITAL

Sr. No Particulars Amounts

(Rs)

A Current Assets, Loan & Advances

(a) Investment ---------

(b) Sundry Debtors -----------

(c) Cash & Bank Balances -----------

(d) Other current assets -----------

( e) Loans & Advances -----------

Total of “A” ----------

Less

BCurrent liabilities & Provisions ---------

(a) current liabilities ---------

(b) Provisions ---------

Total of “B” --------

Net Working Capital (Total of A-B ) ----------



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OBJECTIVE OF STUDY

My Project Report mainly focuses on “Working Capital”

To determine the amount of working capital requirement and to calculate various ratios

relating to working capital.

To make an item wise study of the components of the working capital.

To suggest the steps to be taken to increase the efficiency in management of working

capital.

To develop the different sources of finance.

To know the financial position of the company.



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CURRENT ASSETS

Current assets are those assets which can convert in to cash within a short period normally

one accounting year.

Constituents of current assets

1) Cash in hand and cash at bank

2) Bills receivables

3) Sundry debtors

4) Short term loans and advances

5) Inventories of stock as

a. Raw material

b. Work in process

c. Stores and spares

d. Finished goods

6) Temporary investment of surplus funds

7) Prepaid expenses

8) Accrued incomes

9) Marketable securities



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CURRENT LIABILITIES

Constituents of current liabilities

1) Accrued or outstanding expenses.

2) Short term loans advances and deposits.

3) Dividends payables.

4) Bank overdraft.

5) Provision for taxation, if does not amount to of profit.

6) Bills payable.

7) Sundry creditors.

The gross working capital concept is financial or going concern concept whereas net

working capital is an accounting concept of working capital. Both the concepts have their

own merits.



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GENERAL INFORMATION OF ALEMBIC

LIMITED

LOGO

The BLUE color represents stability, knowledge, dependability and strength of character.

The GREEN color symbolizes prosperity and freshness of thoughts (innovation).

The two uni-directional arrows in the logo indicate momentum to achieve the real

potential to reach higher goals and aspirations. It gives a feeling of directed and purposeful

movement in the company.

Alembic made a humble beginning more than 10 decades ago in 1907, it has been driving

itself on ethos of „Self Reliance, Indigenization, Innovation and Import Substitution. This



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very commitment and focus resulted in Alembic becoming the Public Sector Company.

Alembic is in the business of improving the quality of life and healthcare in over 75 countries

around the world.

The credit for setting up this pharma company is shared by three people – promoter RajMitra, B.D. Amin, Dr. T.K. Gajjar and Prof. Kotibhaskar under the guidance of H.H

Maharaja Sayajirao III.

Alem bic‟ is Asia's most respected integrated pharmaceutical company with

manufacturing practices and facilities in Baroda, Panelav, Karakhadi and Baddi that conform

to WHO-GMP guidelines with a total turnover in excess of Rs. 1200 crores. Alembic

Research Center (ARC) spread over 120,000 sq ft at Vadodara has state-of-the-art research

facilities, designed conforming to international standards.

From 1950‟s onwards, it ventured into pharmaceutical business and after 1960 in the

production of bulk drugs. Alembic Ltd. is the 17th largest pharmaceutical company in India

and is engaged is manufacturing of basic drugs, pharmaceuticals and antibiotic formulations.

The major basic / bulk drugs manufactured are Penicillin, Erythromycin and Roxithromycin.

Basic production of antibiotic like erythromycin and penicillin is a major activity of the

company. The company can be considered as a pioneer in manufacturing Penicillin through

fermentation process by developing indigenous know-how and, over the years, has improved

on the process technology, the culture and the yields with the help of its own R & D efforts.

The company was conferred Sir P.C. Ray award for indigenous manufacturing of

Penicillin. Alembic Ltd. is also the first and the only basic manufacturer of Erythromycin in

the country. Alembic has also got the distinction of being the first company in India and

second in the world to manufacture the basic drug ROXITHROMYCIN (anti-infective)

under the brand name ROXID. The company has also introduced a revolutionary antibiotic

viz. Azithromycin has unique features of targeted drugs delivery at diseases affected areas in

short courses of treatment popularly termed „tissue directed antibiotic therapy‟. Both Roxid

and Azithral were fruits of latest scientific developments in Pharmaceuticals and in

consonance with the past performance in the marcolide group have emerged as brand leaders

despite stiff competition. The company has recently increased the production capacity of

bulk drugs manufacturing process. It has vast infrastructure facilities in terms of land inprime locality and is equipped to take up any further expansion programs.

The company has also developed various other companies engaged in the area as diverse

as manufacture of glass ware, pesticides and weedicides , fabrications of heavy machinery

for various industrial, printing activities, manufacture of aluminum vial seals and plastic

caps, finance and leasing, investment activities, etc.



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Alembic Group is one of the oldest and most respected business houses with strong and

diverse presence in healthcare, engineering, pharmaceutical and glass sectors. Alembic has

speeded its wings in other than pharmaceutical industry; which are proudly known as

Alembic’s Group Companies.

ALEMBIC GROUP COMPANIES

ALEMBIC LIMITED, the pharmaceutical company.

PAUSHAK LTD. – Leader in Phosgene based derivatives.

Paushak has mastered the Production of phosgene gas and phosgene based specialty

Chemicals / intermediates through indigenously developed Technology. These chemicals are

used in diverse fields such as Pesticides, pharmaceuticals, dyes, plastics etc.



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SHRENO LTD. – GLASS DIVISION (known as YERA Glass)

The Pioneering effort of Shreno from which emerged YERA, first name recalled at the

mention of Glassware. The support of a wide dealership network all over the country has

enabled Yera to achieve a major share in the glassware market. Yera Glassware especially

tableware and dinnerware also reach to many places around the globe through exports



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ALEMBIC LIGHT PUBLICATION

Light Publication is professionally managed unit serving the present day printing andpackaging requirement of respective clients



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SHRENO LTD. – ENGINEERING DIVISION

Shreno Ltd is the engineering company of Alembic group. Shreno designs, develops and

manufactures process plants and special purpose machines for Biotechnology,Pharmaceuticals, Chemicals and Glassware. The company has been active since 1962, and

has one of the best equipped manufacturing facilities in the region. Its customers are major

chemical and pharmaceutical companies, glassware manufacturers and nuclear fuel

processing facilities. The company is set for major expansion activity and market its presence

felt in international markets.



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BHAILAL AMIN GENERAL HOSPITAL (BAGH)

The group includes BHAILAL AMIN GENERAL HOSPITAL (BAGH), an ISO 9001:2000

certified 160 bed-premier hospital, providing all health-care amenities under one roof. This

world-class facility is equipped to provide multi-specialty and tertiary healthcare, 24-hours

emergency, intensive care units, a heart command center, besides a plethora of pathological

testing facilities and a blood bank. BAGH has been in the forefront of ushering in a

revolution in health care in India. From a highly qualified team of doctors to followinginternationally acclaimed practices, everything at BAGH is aimed at offering the best in

health care.



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VISION STATEMENT

To become a knowledge driven global pharmaceutical company with the highest levels of

operational excellence in all spheres.

MISSION STATEMENT

To give access to the best health care products at affordable prices to everyone, anywhere in

the world.

ALEMBIC’S BUSINESSES

API BUSINESS

FORMULATIONS BUSINESS

RESEARCH & DEVELOPMENT ( API , F&D and Bio-Equivalence)



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API (ACTIVE PHARMACEUTICAL INGRIDIENT)

API is significant operations for Alembic Limited.

The fermentation based APIs are manufactured at its main manufacturing facility exceeding3 million sq.mt.

Alembic has an exclusive facility for manufacturing synthetic APIs, consisting of

independent manufacturing blocks for Macrolides, NSAIDs and other drugs. API

manufacturing facility at Panelav has successfully under gone inspection of USFDA and

EDQM.

FORMULATIONS BUSINESS

Plant was commissioned in March 2003.

Plant is designed exclusively for Non ß-lactum Oral Solid Dosage forms.

RESEARCH AND DEVELOPMENT



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Alembic's Multidisciplinary R&D Portfolio Includes:

API RESEARCH

FORMULATIONS RESEARCH

ANALYTICAL RESEARCH

INTELLECTUAL PROPERTY

AWARDS & CERTIFICATIONS

R&D facilities approved by DSIR, GOI in 1975

ISO 9002, ISO 14001, ISO 27001 Certification for its Manufacturing Facilities

First Chemexcil Award in 1991-92

Received award for "Excellence in Environment Preservation and Pollution Control" by

the Federation of Gujarat Industries (FGI) in 1997

Dr.P.C.Ray Award for Quality Inspected in 1969 and approved by MCC (South Africa),

MHRA (UK), USFDA (US) and EDQM



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LOCATIONS

REGISTERED OFFICE BARODA

MANUFACTURING FACILITIES API & Research Center, BARODA

API PLANT, PANELAV

API PLANT, KARAKHADI

FORMULATION PLANT, PANELAV (EOU) & BADDI (DOMESTIC)

FORMULATION MARKETING, MUMBAI



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ALEMBIC CAMPUS

Houses 438 Employees & their families.

Alembic , Tejas ,Utkarsh,Ujjaval Vidyalaya .

Bhailal Amin General Hospital.

Two Libraries - with 12,000 books, 25,000 back volumes and 60 periodical titles, Onlyline database like STN ,SCIFINDER & related with Patents. CD Rom Data base Patent &

Synthesis & Pharmacopeia.

Alembic Cricket Academy.

Badminton / Table Tennis Courts.

Fully computerized Bank / Post Office.

Employees‟ Departmental Store & Yera Arcade.

AXIS Bank ATM.



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BOARD OF DIRECTORS

Sr.No.

Name Designation

1. Mr. Chirayu

Ramanbhai Amin

Chairman &

Managing Director

2. Mrs. Malika Chirayu

Amin

Whole-time Director

3. Dr. Babubhai

Rambhai Patel

Director

4. Mr. Raj Kumar

Baheti

President - Finance

&

Company Secretary

5. Mr. Pranav Natverlal

Parikh

Director

6. Mr. K. G.

Ramanathan

Director

7. Mr. Paresh M.

Saraiya

Director

8. Mr. Pranav Amin Director & Chief

Business

Development Officer



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ALEMBIC -- MILESTONE

1907 :- A joint stock company with a limited liability registered first in

Bombay and then in Baroda. The company was named

ALEMBIC CHEMICAL WORKS CO. LTD.

1909 :- French Distillery Plant Worth Rs. 1 lakh along with machinery for

Pharmaceutical purposes installed in Baroda.

1933 :- Company celebrated Silver Jubilee.

1934 :- Branch Office in Madras was established.

1935 :- Establish a sales office in Calcutta.

1940 :- Started manufacturing cough syrup, vitamins, tonics and sulphur

Drugs.

1952 :- Started R & D activity.

1960 :- Installed Asia’s Largest Fermentor with capacity of 130 KL

1961 :- Inauguration of penicillin Plant by Late Shri Lal Bahadur

Shastry.

1967 :- Bulk Manufacturing of Vitamins B12 by fermentation with know

How of pierell company of Italy.

1968 :- Established Paushak Ltd.

1969 :- Received prestigious Dr. P.C.Ray award for Quality for consecutive

Three years ( 1969 – 1971 )



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1975 :- Pharma Building was set up.

1979 :- Started Rural Development Centre, at Panelav.

1991 :- Received First Chemexcil Award.

1992 :- Launched Azithral – A brand of Azithromycin.

1997 :- Launched Roxid Liquid – First of its kind in the world.

1998 :- Launched Azithral Liquid – First of its kind in the world.

1999 :- Changed Company’s name as – “ ALEMBIC LIMITED”

2000 :- Achieved ISO 14001 certificate.



Page 37

FINANCE DEPARTMENT



Page 38

ORGANIZATION CHART OF FINANCE DEPARTMENT

PRESIDENT

↓

GENERAL MANAGER

↓

SR. MANAGER

↓

MANAGER

↓

DEPUTY MANAGER

↓

ASSISTANT MANAGER

↓

SR. EXECUTIVES

↓

EXECUTIVES



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BASIC FINANCIAL FUNCTIONS FOLLOWED AT ALEMBIC

1. Accounts

2. Indirect taxation

Taxes which are indirectly levied from the end user that is individual or a company by the

government.

Excise

Service Tax

Export Benefits / EXIM policy

Sales tax / Value Added Tax (VAT)

Business Finance

3. Business finance

4. DIRECT TAXES

5. INSURANCE

6. SECRETARIAL AND LEGAL PRACTICES

Business

Finance

Domestic International



Page 40

FINANCIAL OBJECTIVE

1) To ensure adequate return on the capital employed and maintain a reasonable annual

dividend on equity capital.

2) To ensure maximum economy in expenditure.

3) To develop long-term corporate plans to provide for adequate growth of the

Corporation’s business.

4) To manage and operate all facilities in an efficient manner so as to generate adequate

internal resources to meet revenue cost and requirements for project investment, without

budgetary support.

5) To complete all planned projects within the scheduled time and approved cost.

6) To reduce the cost of production of products by means of systematic cost control

measures and thereby sustain market leadership through cost competitiveness.

7) To continue to make an effort in bringing reduction in the cost of production of products

by means of systematic cost control measures.

8) To generate sufficient internal resources for financing partly/wholly expenditure on new

capital projects.

9) To ensure adequate return on capital employed and maintain a reasonable annual

dividend on its equity capital

10) To ensure maximum economy in expenditure.

11) The endeavor to complete all plan projects within stipulated time and within stipulated

cost estimated.



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RESEARCHMETHODOLOGY



Page 42

RESEARCH METHODOLOGY

METHODOLOGY:-

The unit selection for the study was ALEMBIC LTD.. The study was undertaken at

ALEMBIC LTD., Baroda.

The Primary data was collected by way of interviewing the staff at Baroda unit. Secondary

source like Books, Circulars, Alembic Ltd. Publication and Internet were used.

SOURCES OF INFORMATION:-

In order to collect the reliable information, the necessary data has been collected with the

help of different sources that are-

1) Primary sources

2) Secondary sources

1) A Primary source of information is the source of information thought which information

obtained is first hand i.e., from interviewing the officials at ALEMBIC LTD. BARODA.

2) Secondary source of information provides the information which is used by some other

researcher but still it is useful as a reference for the study in some other research work. Under

this source, text books, past project reports, published journals, websites, etc. were used.

OBJECTIVE:

Understand the working capital position and liquid position for the ALEMBIC LTD



Page 43

DATA ANALYSIS



Page 44

DATA ANALYSIS:

In this study the techniques of ratio analysis have been used. The collected data have been

analyzed in following way.

1. Analysis of liquidity ratio.

2. Analysis of liquidity position.

3. Analysis of component of gross working capital.

4. Analysis of component of Net working capital.

SCOPE OF THE STUDY:

1) The study of working capital is limited to company and their year balance sheet

performance.

2) The data used in this study have been taken from published annual report only.

3) For making a clear cut opinion, ratio techniques of financial management has been used.

4) The study of liquidity position of the ALEMBIC LTD. data has been used only for three

years.



Page 45

STATEMENT SHOWING NET WORKING CAPITAL FROM

YEAR 2008 TO 2010

(Rs. in Lacs)

Particular Year

2008

(Rs)

Year

2009

(Rs)

Year

2010

(Rs)

Current assets,

Loan & Advances:

Sundry Debtors 23,053.94 21,300.35 19,286.72

Inventory 20,281.20 23,838.89 24,494.93

Loans & Advances. 8,637.80 12,716.73 12,956.86

Cash & Bank

Balances

1,865.64 1,640.58 2,385.11

Total (Gross

Working Capital)

53,838.58 59,496.55 59,123.62

Less

Current liabilities

& Provisions

Current Liabilities. 15,218.57 18,815.94 21,821.53

Provisions. 2,882.88 1,423.53 1897.80

Total. 18,101.45 20,239.47 23,719.33

Net Working

Capital.

35,737.13 39,257.08 35,404.29





Page 47

INTERPRETATION:-

From the graphically representation, We can say that from year 2008 to 2009 current assets

of the company increases. But in March 2010 it was decrease up to 59,123.62 Rs. Because of

decrease in sundry debtors of the company.

SUNDRY DEBTORS:-

Sundry Debtors is an entity from who amounts are due for goods sold or services rendered or

in respect of contractual obligations. Also termed: debtor, trade debtor, and account

receivable.

Graphical Presentation of sundry debtors(Rs. in Lacs)

Year March 2008 March 2009 March 2010

Debtors 23,053.94 21,300.35 19,286.72

23,053.94

21,300.35

19,286.72

17,000.00

18,000.00

19,000.00

20,000.00

21,000.00

22,000.00

23,000.00

24,000.00

Mar-08 Mar-09 Mar-10

Debtors

Debtors



Page 48

INTERPRETATION:-

From the graphically representation, we can say that from year 2008 to 2010 Sundry Debtors

of the Alembic Ltd. is continue decrease.

INVENTORY:-

The raw materials, work-in-process goods and completely finished goods that are considered

to be the portion of a business's assets that are ready or will be ready for sale. Inventory

represents one of the most important assets that most businesses possess, because the

turnover of inventory represents one of the primary sources of revenue generation andsubsequent earnings for the company's shareholders/owners.

Graphical Presentation of Inventory

(Rs. in Lacs)


Inventory 20,281.20 23,838.89 24,494.93

20,281.20

23,838.89 24,494.93

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00


Inventory

Inventory



Page 49

INTERPRETATION:-

From the graphically representation, we can say that inventory level is continues increases. In

March 2008 it was 20,281.20 which increase up to 23,838.89 and in March 2011 it is24,494.93. Because of increase in closing stock it indicates that there is decrease in sales of

the compan

LOANS & ADVANCES:-

Graphical Presentation of Loans & Advances


Loans &

Advances

8,637.80 12,716.73 12,956.86

8,637.80

12,716.73 12,956.86

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00


Loans & Advances

Loans & Advances



Page 50

INTERPRETATION:-

From the graphically representation, we can say that loans & advances of Alembic Ltd. is

continues increases in March 2009 it was 12,716.73 Rs. And in March 2010 it was12,956.86.

CASH & BANK BALANCE:-

Graphical Presentation of Cash & Bank Balances

(Rs. in Lacs)


Cash & Bank

Balances

1,865.64 1,640.58 2,385.11

INTERPRETATION:-

From the graphically representation, we can say that cash & bank balance of Alembic Ltd. is

increase from March 2008 to March 2010. It is Good for Alembic Ltd. Because of increase in

cash & bank balance company should eligible for satisfying its debt obligations.

1,865.641,640.58

2,385.11

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00


Cash & Bank Balances

Cash & Bank Balances



Page 51

CURRENT LIABILITIES:-A company's debts or obligations that are due within one year. Current liabilities appear

on the company's balance sheet and include short term debt, accounts payable, accrued

liabilities and other debts.

Graphical Presentation of current Liabilities

(Rs. in Lacs)


Current

Liabilities.

15,218.57 18,815.94 21,821.53

15,218.57

18,815.94

21,821.53

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00


Current Liabilities.

Current Liabilities.



Page 52

INTERPRETATION:-

From the graphically representation, we can say that Current Liabilities of Alembic Ltd. is

continuously increase from March 2008 to March 2010. This is not good for company.

PROVISIONS:-

A provision takes into account an expected expense, showing it as a liability on the balance

sheet.

Graphical Presentation of Provisions

(Rs. in Lacs)


Provisions. 2,882.88 1,423.53 1,897.80

2,882.88

1,423.53

1,897.80

0.00

500.00

1,000.00

1,500.00

2,000.00

2,500.00

3,000.00

3,500.00


Provisions.

Provisions.



Page 53

INTERPRETATION:-

From the graphically representation, Expenses on thae provision is decrease in March 2009

as compared to March 2008. And it was increase in March 2010 as compared to March 2009.

NET WORKING CAPITAL:-

Net working capital refers to the different between Current assets and current liabilities are

those claims which are expected to nature of payment within an account.

Graphical Presentation of Net Working Capital

(Rs. in Lacs)


Net Working

Capital.

35,737.13 39,257.08 35,404.29

35,737.13

39,257.08

35,404.29

33,000.00

34,000.00

35,000.00

36,000.00

37,000.00

38,000.00

39,000.00

40,000.00


Net Working Capital.

Net Working Capital.



Page 54

INTERPRETATION:-

From the graphically representation, Net Working Capital is increase in Mrach 2009 as

compared to March 2008 & it was decrease in March 2010 as compared to March 2008 &2009. It was decrease in 2010 because of increase in Inventory level, loans & advances and

also increase in cash & bank balance of the company.

RATIO ANALYSIS:-

a). Current Ratio

Current ratio is calculated by dividing current assets by current liabilities. The current ratio

of 2:1 is considered satisfactory.

Objective: The objective of computing this Ratio is to measure the ability of the firm to meet

its short-term obligations and reflect financial strength of the firm.

Current ratio = Current assets / Current liabilities

Current Ratios of ALEMBIC LTD.(Rs. in Lacs)

YEAR 2008 2009 2010

CURRENT ASSETS 45,200.78 46,779.82 46,166.76

CURRENT LIABILITIES 15,218.57 18,815.94 21,821.53

CURRENT RATIO 2.97 : 1 2.48 : 1 2.11 : 1



Page 55

INTERPRETATION:-

Standard current ratio 2: 1 and our organization current ratio is 2.11 : 1. It is Lower in

comparison of 2008 & 2009. It is not good for organization to meet their current obligations.

b).Quick Ratio

Objective: The objective of computing this ratio is to measure the ability of the firm to meetits short-term obligation as and when due without relying upon the realization of stock.

Generally, a quick ratio of 1:1 is considered to represent satisfactory current financial

position.

Quick ratio= Current assets – Inventories / Current liabilities

2.97

2.48

2.11

0

0.5

1

1.5

2

2.5

3

3.5

2008 2009 2010

CURRENT RATIO

CURRENT RATIO



Page 56

Quick Ratios of ALEMBIC LTD.(Rs. in Lacs)

YEAR 2008 2009 2010

LIQUID ASSET 43,335.14 45,139.24 43,781.65

CURRENT LAIBILITIES 15,218.57 18,815.94 21,821.53

QUICK RATIO 2.84 2.40 2.00

INTERPRETATION:-

The liquid assets are equal to or more than liquid liabilities the condition may be consider as

satisfactory. The quick ratio of 1 : 1 is considered to be a satisfactory ratio.Our origination

quick ratio more than 1 : 1. So it is good for our origination because it may be meeting its

short term obligation in time.

2.84

2.4

2

0

0.5

1

1.5

2

2.5

3

2008 2009 2010

QUICK RATIO

QUICK RATIO



Page 57

Current Assets to Working Capital Ratio

This ratio shows the relationship between current assets and working capital. It indicates the

percentage of current assets to working capital.

Current Assets to Working Capital Ratio = Current Assets

Working Capital

(Rs. in Lacs)

YEAR CURRENT

ASSETS

WORKING

CAPITAL

CA to WC

RATIO

March 2008 45,200.78 35,737.13 1.26

March 2009 46,779.82 39,257.08 1.19

March 2010 46,166.76 35,404.29 1.30

1.26

1.19

1.3

1.12

1.14

1.16

1.18

1.2

1.22

1.24

1.26

1.28

1.3

1.32

2008 2009 2010

CA to WC RATIO

CA to WC RATIO



Page 58

INTERPRETATION:-

CA to WC Ration is decrease in March 2009 as compared to March 2008 & March 2010

because there is increase in Net Working Capital of company as compared to March 2008 &March 2010.

Working Capital Turnover Ratio

This Ratio establishes a relationship between net sales and working capital.

Working capital = Current Assets – Current Liabilities

Working capital Turnover Ratio = Cost of goods sold / Net working capital

COGS = Sales – Gross Profit

Working capital turnover ratio is to indicate the velocity of the utilization of net working

capital. This ratio indicates the number of times the working capital is turned over in the

course of a year.

(Rs. in Lacs)

YEAR COGS WORKING

CAPITAL

WORKING

CAPITAL

TURNOVER

RATIO

March

2008

86,617.55 35,737.13 2.42

March

2009

99,444.45 39,257.08 2.53

March

2010

92,408 35,404.29 2.78



Page 59

INTERPRETATION:-

Working Capital turnover ratio is increases in March 2010 as compard to March 2008 &

2009. It is 2.42 in March 2008 & increase by 2.78 in March 2010.

2.42

2.53

2.78

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2.9

2008 2009 2010

WORKING CAPITAL TURNOVER RATIO

WORKING CAPITAL

TURNOVER RATIO



Page 60

Findings & Observations

The company finance its working capital through its internal accruals. It is also making

use of financial instruments like Overdraft, Cash credit, Bill Purchase, Export packing

credit foreign bill Purchase/Discount. It makes use of such instrument in order to be safe due to

export dealing of vary high values

There are increase in current liabilities of the Alembic ltd. Therefore company should take

proper steps to maintain current liabilities.

In ratio analysis, I observed of comparison with inter firm comparison and standard.

The successful implementation of working capital budget involves the preparing of

separate budget for each element of working capital, such as, cash, inventories and

receivables etc.

The requirement of working capital is not stable in the company. It was 35,737.13 Rs. In

2008, 39,257.08 Rs. In 2009 and 35,404.29 Rs. In 2010.



Page 61

LIMITATIONS OF STUDY

Period of time: Internship Project time is short and within this time everything of the

study is not covered deeply.

Due to time constraints all the aspects of the WORKING CAPITAL couldn ’t be studied

and elaborated.

Ratios of company have meaning only when they are compared with some standard. It is

difficult to find out proper basis of comparison.

In limited time it is not possible to interact with all the employees of the organization

who are directly involve in the financial accounting department.



Page 62

SUGGESTIONS

The plant must take certain steps to decrease the working capitalcycle. One way can be better management of inventories.

Company should use Management Information System (MIS) as it provides very

effective information, which ultimately helps in decision-making. This results in the

proper future projections effectively.

Company should install modernized equipments and machines in the production

plants and new techniques should also be used to produce.

The company needs to improve a lot in advertisements. Advertisements are the best way

to enhance the sales and ultimately the revenues. But the company is not able to advertise

its products properly, due to which the customer is unaware of any brand that comes from

it. It is a common saying that “out of sight is out of mind”. Therefore the company must

make attempts to use proper advertising media so as to set their brands in the minds of

the consumers. It should be more consumers oriented rather than being customer oriented

Proper market survey should be conducted to know consumers/dealers buyingbehavior

Company should take several steps to make stable requirement of working capital.



Page 63

CONCLUSION

The study involves practical and conceptual over view of decisions concerning currentassets like cash and bank balance ,inventories( like raw materials ,w-i-p, finished goods

),sundry debtors, loans and advances, other current assets and current liabilities like

sundry creditors, securities and other deposits, other current liabilities and provisions of

Alembic Ltd.. Was with the objective of maximizing the overall net profit of the bank.

And complete synchronization and co ordination among the working capital components

which shall contribute to optimum level of operations. Mismanagement of each or any of

these components shall be detrimental to the objectives of efficient operation,

profitability and maximization of overall value of the bank.

The working capital limits would be considered only after the project nearing completion

and after ensuring control over the inventory. The inventory is a great concern for

Alembic Ltd. and it need proper procurement and management.

Eligible working capital limits would be assessed by cash Budget method And Projected

production method depending the market condition, scale of operation, nature of

activity/enterprise and duration/length of operating cycle etc.



BIBLIOGRAPHY

Books

Financial Management

By I. M. Pandey (Sixth Edition)

Annual Report of ALEMBIC LTD.

Websites

www.alembic-india.com

www.google.com

Documents

Report of Working Capital at Alembic Ltd