Working Capital Management

Working Capital Management
Case Study – Textile spinning PRESENTED BY : CA – PRADIP MODI Member Advisory Board, PKM ADVISORY SERVICES PVT. LTD. AHMEDABAD MOBILE : , Phone :

FINANCING OF AN ENTERPRISE
BUSINESS ACTIVITY – Trading – Manufacturing – Green Field – Expansion – Diversification FINANCING PATTERN Trading – Short Term – Annual basis – Working Capital Manufacturing – Long Term – 5 to 7 years – Term Loan Short Term – Annual basis – working capital Working Capital – Fund Based Non fund based – letter of credit – guarantee Term Loan – Rupee Loan – Foreign Currency – ECB – Debentures – Private Equity SOURCES OF FINANCING Banks Financial Institutions Non Banking Financing Companies

HISTORY OF BANKING IN INDIA
Reserve Bank of India commenced operation from April, 1, 1935. Through Reserve Bank of India Act, 1934 (II of 1934) 1949 – Enactment of Banking Regulation Act. RESERVE BANK OF INDIA played a special role in the context of Development Instrumental in setting up Development Institutions Setup Institutions to build the financial infrastructure Deposit Insurance and credit guarantee corporation of India Unit Trust of India The Industrial Development Bank of India (IDBI) The National Bank of Agricultural and Rural Development (NABARD) The Discount & Finance house of India.

PHASE I General Bank of India – 1786 Bank of Bengal – 1809 Bank of Bombay – Established by The East India Company, Bank of Madras – Merged into imperial bank in 1920. 1865 onwards banks were established exclusively by indians. PHASE II Banking Sector Reforms Imperial Bank was nationalised in 1955 – State Bank of India was formed Seven Banks forming subsidiaries of State Bank of India were nationalised in 1960. 14 Major commercial banks were nationalised on 19th July 1969. PHASE – III 1991– Indian economy opened up Liberalisation of banking practices Continuing Government control with public participation.

BANKING INDUSTRY in retrospect.
1) PRE-NATIONALISATION (private ownership) Prior to 1969, focus more on individual credibility of borrower rather than huge paper work. Setbacks were largely absorbed by corporate houses who owned them. 2) POST NATIONALISATION Pre – supposed social objectives with specific mandate to banks; i) To expand branch network – mostly in rural India. ii) Flow of credit to rural and SSI sector – Approach at times that banking industry should sacrifice, if required in achieving social goal (not scientifically defined) – known as Loan Mela. 3) POST – LIBERALISATION (Precisely 1990 onwards) Economy to global competition. Focus shifted to better risk management and improving quality of assets. More transparent system to reflect true financial position of banks.

Systematic efforts initiated first time in 1991 for performance evaluation of the borrower and lenders. Committee under the Chairmanship of Mr. M. Narsimham – 1) To study prevailing financial system, 2) To identify shortcomings and weakness 3) To prescribe norms to make the disclosure practices more transparent and meaningful. Report tabled in parliament on

RECOMMENDATIONS PRUDENT ACCOUNTING NORMS FOR INCOME RECOGNITION To make if more objective based on record and recovery rather than subjective considerations like availability of security, net worth of borrower and guarantors (even though, importance given on security and net worth as banking system requires).

BANKING – WORKING CAPITAL LENDING PROCEDURE
Prior to Tondon / Chore Committee Recommendations Through credit authorisation system – centralised Branch Office – Regional office – Zonal office – Head Office – RBI – CAS Queries – RBI – Head Office – Zonal Office – Regional Office – Branch office COMMITTEE RECOMMENDATION – DECENTRALISED Methodology Norms of Current assets in major industries End – use criteria Maximum Permissible Bank Finance Emphasis on loan systems Periodic Information and reporting system

CREDIT MONITORING ARRANGEMENT (CMA)
STRUCTURE PROFITABILITY PROJECTIONS – OPERATING STATEMENT Past two years’ – Audited. Current year – estimated Next year – projected BALANCE SHEET ANALYSIS A. I) Current liabilities a) Bank Borrowing – Working Capital limit. b) Current liability – payable within one year c) Total current liabilities – (a) + (b) Long Term Liabilities – Payable after one year a) Total outside liabilities Net worth Equity + Reserves & Surplus. TOTAL I) Current Assets – Assets realisable within one year ii) Deferred current assets – more than one year. iii) Gross Fixed assets – Depreciation = Net fixed assets iv) TOTAL

WORKING CAPITAL – DEFINITION Current Assets – Current Liabilities
The funds which are used to manage day to day business operations Current Assets – Current Liabilities CURRENT ASSETS Inventory - Raw materials - Work in progress - Finished goods - Stores, spares, Packing material Receivables Cash & Bank Balance CURRENT LIABILITEIS Trade Creditors Expenses – Provisions – Payable within one years Assessed on an annual basis Assets conversion cycle through operations

ASSESSMENT OF WORKING CAPITAL
Maximum Permissible Bank Finance (MPBF) Tondon Committee Recommendations Method – I Promoters 25% of net working capital (Current Assets – Current Liabilities) Method – II Promoters 25% current assets Method – III 100% of hard core assets + 25% of other current assets Chore Committee discarded method III and recommended Method II Method II Known as MPBF Working Capital Gap Method Method - I Method - II 1) Current assets 1000 2) Current Liabilities (Excluding bank) 400 3) Working Capital gap 600 4) Minimum Stipulated - Net working capital 150 250 (25% of No.3) (25% of No.1) 5) Bank finance 450 350 (3-4)

CMA - DATA FORM – I Particulars of Existing and Proposed Limits
FORM – II Operating Statement FORM – III Analysis of Balance Sheet FORM – IV Comparative Statement of Current assets & Current Liabilities FORM – V Computation of Maximum Permissible Bank Finance (MPBF) FORM –IV Funds Flow Statement

PROJECT APPRAISAL Till the year 2000
Project Funding was done by Financial Institutions 1) State Financial Corporations. 2) Industrial Development Bank of India (IDBI). 3) Industrial Finance Corporation of India (IFCI) 4) Industrial Credit and Investment Corporation of India (ICICI). 5) Small Industrial Development Bank of India (SIDBI). Working capital provided by commercial banks. Funding pattern is changed. IDBI & ICICI transformed into full fledged banking Commercial Banks provide both Term Loans and Working Capital.

PROJECT APPRAISAL A process to assess various aspects for arriving at a financing decision. Managerial Competence – Resourcefulness, competence and integrity of the management. Technical Feasibility – Appropriate Technology to maintain quality and cost competitiveness. Availability of skilled management team Commercial Feasibility – Detailed market survey – both desk and field survey. Financial Feasibility i) Cost of production & Projected profitability. ii) Balance Sheet and Cash flow statement. iii) Financial ratios – Term Loan Working capital - Short term funds are not diverted to finance long term assets. - Availability of raw material, power and labour.

FINANCIAL RATIOS AND PARAMETERS
SHORT TERM VIABILITY PROFITABILITY Gross profit to sales Net profit to sales Raw Materials to sales Interest to sales Interest Coverage ratio BALANCE SHEET Current ratio Total Outside Liability to Tangible net worth Term Liability to Tangible net worth Stock turnover ratio Receivable Turnover ratio LONG TERM VIABILITY PROFITABILITY Gross profit to sales Operating profit to sales Net profit to sales Cash accruals DSCR – Debt service coverage ratio Break even Analysis Sensitivity Analysis Internal rate of return BALANCE SHEET Current ratio TOL to Tangible Net worth Term Liability to Tangible Net worth

Implication of each ratios
Current ratios Current assets are sufficient to service current liabilities 1.33:1. TOL to TNW Total outside liabilities against tangible net worth are not out of proportion – Maximum 3 to 4 times DSCR Cash accruals are sufficient to service interest on Term Loan and Term Loan – Minimum 1.75 times Break Even Analysis Capacity utilisation & Turnover at a level where both variable and fixed expenses are absorbed – No profit – No loss. Sensitivity Analysis Profitability level, cash accruals and DSCR i) At a level when sales price is lower in actual than assumed. ii) At a level when raw material price is higher in actual than assumed. iii) At a level when production is lower in actual than assumed. Interest coverage ratio Profit before interest divided by interest How many times, profit covers interest 7) Stock & receivable How many time stocks and Receivables are routed Turnover ratio against assumed sales

Project Viability PROMOTERS’ Point of view Proper use of technology
Monitoring Cost control Technical Skilled Manpower Appropriate process flow-control – Reduce wastages Financial discipline – Judicious use of finance Inventory control Marketing – Keep check on competition – Domestic / Global BANKERS – institution point of view SHORT TERM Control on Receivables – Current assets No diversion of working capital for long term assets Proper implementation of process flow chart Production planning LONG TERM Cash accruals as planned to service debt Proper knowledge on sensitivity Break – even planning

Control of stock in process Yarn production cycle – 7 days
2nd 3rd 4th 5th 6th 7th Process Stock 110 225 340 455 570 685 Overheads 5 115 230 345 460 575 690 Raw material 100 Overhead 10 Stock in progress 800 660 Finished goods 140

Selection of Product Mix
The product mix depends upon various factors. Promoters’ Competency – experience – Market knowledge Proper market survey – Marketing network The selection of Machineries based on proposed product mix Whether carded yarn only carded and combed yarn Financial Resourcefulness Technical Manpower Availability of Raw material

Case Study – Textiles – Spinning
TEXTILE - VALUE CHAIN

Manufacturing Process
Man made Filament Man-made Staple fibers Natural Fibers (Cotton) Fiber Cleaning Texturizing Blending Carding Drawing Combing Drawing Drafting - inter Spinning Winding

Technical Parameters LENGTH Staple Classification Length MM
Length Inches Product Mix Count 1) Short Less than 24 15/16-1 Coarse below 20s 2) Medium 24-28 1.1/ /32 Medium Count 20s – 40s 3) Long 28-34 1.3/32-1.3/8 Fine count 40s – 60 s count 4) Extra long 34-40 1.3/8-1.9/16 Superfine count 80s – 140s

Co-relation between fiber and yarn.
Staple length spinning potential Fiber strength Yarn strength, less breakages Fineness Finer spinning potential Maturity Yarn strength and evenness, better dyeing absorbity Trash (non-lint content) Reduce waste Uniformity Ratio Better productivity and evenness Elongations less end breakages Friction cohesiveness Yellowness Yarn appearance Nepiness Yarn nepiness Moisture Content 8.5% moisture content optimum for 65%.

COST OF PROJECT Rs. Lacs MEANS OF FINANCE
COST OF PROJECT SPINNING SPINDLES Rs. Lacs 1) Land & Site Development Land is taken on lease - Site development 5.00 2) Buildings Factory Building 545.64 3) Plant & Machineries 4) Engineering, Electrification & humidification 164.66 5) Maintenance workshop 9.55 6) Material handling equipments 29.57 7) Misc. Fixed assets, Computers, office equipments 25.00 8) Preliminary expenses 10.00 9) Preoperative 3% 68.71 10) Provision for 3% 11) Interest during construction 153.20 12) Margin money for working capital 28.95 TOTAL MEANS OF FINANCE Equity Share Capital 227.50 Share Premium 455.00 Unsecured Loan Term Loan TOTAL Promoters' Contribution D.E.R Assets coverage Ratio

Production Calculation
7.22 x rpm TPI = T.M X √Count TPI X Count 4.1 x = 1) 20s Carded 7.22 x = gms per spindles shift x 4.1 x = 2) 24s Carded 7.22 x = gms per spindles shift x 4.1 x = 3) 30s Carded 7.22 x = gms per spindles shift x 4.1 x = 4) 40s Carded 7.22 x = gms per spindles shift x

NO. OF MACHINES REQUIRED AT EACH STAGE
Production No. of STAGE per day kgs. Machines per machine require Blow Room 12960 10327 1 Cards 1207 9811 9 Draw Frames - Breaker 5112 9781 2 - Finished single delivery 2716 9752 4 Inter 1708 9699 6

RAW MATERIAL REQUIRED PER DAY 10871 KGS.
PRODUCTION AT EACH STAGE – RAW MATERIAL REQUIREMENT Capacity Utilisation – 97% efficiency 94% Yarn Production – Ring Frame – 9457 Kgs per day Yarn Production – Autoconor – 9362 Kgs per day – Final product for sale Input Output Kgs. / Day Blow room 10871 10327 Carding 9811 Drawing - 1 9781 Drawing - 2 9752 Inter 9699 Ring Frame 9457 Autoconor 9362 Yield 86.12% RAW MATERIAL REQUIRED PER DAY KGS.

Assumptions For the year ending 31st March 2012 2013 2014 2015 2016
For the year ending 31st March 2012 2013 2014 2015 2016 2017 2018 1 No of days 165 330 2 No. of Shifts 3 No of Machines 20s Carded 20 5 24s Carded 24 4 30s Carded 30 40s Carded 40 Total Machines 17 Spindles per machine 1008 Total spindles Nos. 5040 4032 17136 6 Capacity Utilisation 92.00% 95.00% 97.00%

7 capacity utilisations 2012 2013 2014 2015 2016 2017 2018 20s Carded Nos. 4637 4788 4889 24s Carded 3709 3830 3911 30s Carded 40s Carded 15765 16279 16622 8 RPM 13500 15000 17000 9 TM 4.10 10 TPI 18.336 20.086 22.457 25.931 11 PRODUCTION Gms. / spindle / shift Gms 266 225 182 118

12 Efficiency 2012 2013 2014 2015 2016 2017 2018 20s Carded 94% 24s Carded 30s Carded 40s Carded 13 PRODUCTION Gms. / spindle / shift Gms 250 211 171 111 14 Kgs. Per day Kgs. 3475 3589 3664 2350 2427 2478 1906 1968 2009 1238 1278 1305 8969 9262 9457 15 573447 387765 800820 817679 314457 649423 663095 204246 421813 430693

16 SELLING PRICE 2012 2013 2014 2015 2016 2017 2018 20s Carded Rs. / Kg. 140.00 24s Carded 150.00 30s Carded 165.00 40s Carded 180.00 17 SELLING PRICE (WASTAGE) 30.00 35.00 40.00 45.00 18 WASTAGE Yield 86.12% 573447 Invisible loss 1.00% 6659 13751 14041 Saleable waste 12.88% 85744 177081 180809 100.00% 665850 387765 800820 817679 4502 9299 9494 57980 119742 122263 450248 929861 949437 314457 649423 663095 3651 7541 7699 47019 97104 99149 365128 754068 769943

40s Carded 2012 2013 2014 2015 2016 2017 2018 Yield 86.12% 204246 421813 430693 Invisible loss 1.00% 2372 4898 5001 Saleable waste 12.88% 30540 63071 64399 100.00% 237157 489782 500093 Raw Material requirement 20s Carded Kgs. 665850 24s Carded 450248 929861 949437 30s Carded 365128 754068 769943 19 RAW MATERIAL COTTON FOR (Rs./ Kgs.) 77.25 90.00 20 Power 1666 1666 x 96% x 76% x 24 x days x Capacity units 4.80 212.56 438.99 448.23

2012 2013 2014 2015 2016 2017 2018 21 Stores & Spares % of sales 1.00% 22 Other manufacturing exps. 2.00% 23 Administrative expensive 1.50% 24 Marketing expenses 25 Repairs & Maintenance - Building % of bldg. 0.53% - Plant & Machineries % of P&M. 1.03% 26 Interest on term Loan 11.50% Interest on Working Capital 12.50% 27 Spinning Stock in process days 7 Finished goods 28 Current Assets Raw Material 50 60 Stores & Spares Stock Receivables 40 Other Current assets 5% 10% 29 Current Liabilities Trade Creditors 10 Other Current liabilities Of stores 3.00%

CMA DATA - FORM II OPERATING STATEMENT
2012 2013 2014 2015 2016 2017 2018 Days 165 330 (Rs. Lacs) Sales 1909 4838 4945 4955 Raw materials 1404 2900 2961 Direct expenses 337 719 735 738 742 746 750 Stock Adjustments -375 -15 -8 1366 3604 3688 3699 3703 3707 3711 Depreciation 112 225 Total 1478 3829 3913 3924 3928 3932 3936 Gross profit 431 1009 1032 1031 1027 1023 1019 Indirect exps. 55 140 143 144 Profit before tax 376 869 889 887 883 879 875 Interest 150 296 274 234 194 154 118 Operating profit 226 573 615 653 689 725 757 Misc. Exps. W/off. 1 Taxes 52 184 210 233 255 275 Net profit 173 418 430 442 455 469 481 Cash accruals 286 644 656 668 681 695 707

ANALYSIS OF BALANCE SHEET
CMA DATA - FORM III ANALYSIS OF BALANCE SHEET 2012 2013 2014 2015 2016 2017 2018 CURRENT LIABILITIES (Rs. Lacs) Bank Borrowing for W.C - From Existing ban 800 900 - From other banks - Sub-total Trade Creditors 60 88 90 Installments falling due within on year 174 348 Other 2 3 236 439 441 267 93 TOTAL CURRENT LIABILIITES 1036 1239 1341 1167 993 TERM LIABILITIES Term Loans Installments for more than one year 1566 1218 870 522 TOTAL OUTSIDE LIABILITIES 2602 2457 2211 1863 1515 NET WORTH Equity with premium 683 General reserves 172 590 1020 1462 1916 2384 2865 Unsecured loans from promoters 227 1082 1500 1930 2372 2826 3294 3775 TOTAL LIABILITIES 3684 3957 4141 4235 4341 4461 4768

ANALYSIS OF BALANCE SHEET
CMA DATA - FORM III ANALYSIS OF BALANCE SHEET 2012 2013 2014 2015 2016 2017 2018 CURRENT ASSETS Cash and Bank Balance 35 38 413 731 1063 1409 1942 Fixed Deposits with bank - Margin Money -- - Receivables 283 567 580 581 Sub-total INVENTORIES Raw Material 426 527 538 Work-in-progress 78 82 83 Finished goods 297 309 316 317 318 Others 3 4 804 922 941 942 943 Advances 54 149 152 TOTAL CURRENT ASSETS 1176 1676 2086 2405 2738 3084 3618 Gross Block 112 337 562 787 1012 1237 1462 Less : Depreciation 2499 2274 2049 1824 1599 1374 1149 NET BLOCK Other Non-current assets 9 8 6 5 1 Preliminary exps. Not W/off 3684 3958 4141 4234 4341 4461 4768 TOTAL ASSETS Current Ratio TOL / TNW TL/TNW

COMPARATIVE STATEMENT OF CURRENT ASSETS & CURRENT LIABILITIES
FORM - IV 2012 2013 2014 2015 2016 2017 2018 A: CURRENT ASSETS 1 Raw material a) Imported b) Indigenous 426 527 538 2) Stores 3 4 Stock in process 79 82 83 Finished Goods 297 309 316 317 318 5 Receivables 283 567 579 580 6 Export receivables 7 Advances To Suppliers of Goods 8 Other current assets incl. Cash & bank 90 187 565 883 1215 1561 2094 TOTAL CURRENT ASSETS 1176 1676 2086 2406 2738 3085 3618

COMPARATIVE STATEMENT OF
CURRENT ASSETS & CURRENT LIABILITIES FORM IV B. CURRENT LIABILITIES 2012 2013 2014 2015 2016 2017 2018 7 Creditors 60 88 90 8 Advances From Customers 9 Statutory Liabilities (hire purchase) 10 Other Current Liabilities I) Interest on term loan of GIIC – deferred ii) Installments payable within one year 174 348 iii) Dividend Payables iv) Installments of Term Loans, DPG Public Deposits, debentures etc v) Other liabilities 2 3 11 TOTAL CURRENT LIABILITIES 235 439 440 266 92

COMPUTATION OF MAXIMUM PERMISSIBLE BANK FINANCE FOR WORKING CAPITAL
FORM V 2012 2013 2014 2015 2016 2017 2018 1 Total Current Assets (9 in Form IV) 1176 1676 2086 2406 2738 3085 3618 2 Other Current Liabilities (other than Bank Borrowings) 235 439 440 266 92 3 Working Capital Gap(WCG) (1-2) 941 1237 1646 1965 2298 2818 3525 4 Minimum Stipulated Net Working capital 419 521 601 685 771 904 5 Actual Project Net Working capital 141 437 746 1065 1398 1918 2625 (45 in Form-III) 6 Item 3 Minus Items4 818 1124 1364 1613 2047 2621 7 Item 3 Minus Items5 800 900 8 Maximum Permissible Bank Finance (Item 6 or 7 Whichever is Lower) 9 Excess Borrowings representing Short fall in net working capital (4-5)

FUNDS FLOW STATEMENT - FORM VI
2012 2013 2014 2015 2016 2017 2018 1 SOURCES a) Net Profit After Tax 172 418 430 441 454 468 481 b) Depreciation 112 225 c) Increase in capital 683 d) Increase in Term Liabilities 1566 increase in unsecured loans 228 f) Decrease in: I) Fixed Assets g) Others (P & P Written Off) h) TOTAL 2762 644 656 668 680 695 707 2 USES Decrease in Term Liabilities 348 174 Increase in: 2611 ii) Other non Current Assets - P & P 10 Normal Capital Expenditure iii) Deferred receivables Dividend payment Others - Decrease in Creditors for P&M e) Total 2621 3 Long Term Surplus(=)Deficit(-)1-2 141 296 308 320 332 521

4 Increase/Decrease in Current Assets 1176 496 36 2 5 Increase/Decrease in Current 235 -203 -2 174 Liabilities other than Bank Borrowing 6 Increase/Decrease in working capital gap 941 296 408 320 332 521 707 7 Net Surplus(=) Deficit(-) -800 -100 (Difference of 3 &6) 8 Increase/Decrease in Bank Borrowing 800 100 INCREASE/DECREASE IN NET SALES 1909 2929 107 10

BREAK EVEN ANALYSIS 2012 2013 2014 2015 2016 2017 2018 Production Kgs. Sales (Net of stock) VARIABLE EXPENSES Raw Material & Packing Mat. 100% Power & fuel 90% 191.31 395.09 403.40 Wages 52.21 104.42 107.56 110.78 114.11 117.53 121.05 Stores and Spares 18.31 46.76 47.79 47.89 Mfg. Exps. 32.95 84.16 86.03 86.20 Selling Exps. 27.46 70.14 71.69 71.83 Interest on working Capital 50.00 100.00 112.50 Total Variable Expenses CONTRIBUTION 508.08 % of sales 22.24% 23.75% 23.49% 23.43% 23.37% 23.30% 23.23% FIXED EXPENSES Power 10% 21.26 43.90 44.82 5.80 11.60 11.95 12.31 12.68 13.06 13.45 Mfg. Expenses 3.66 9.35 9.56 9.58 Administrative exps Depreciation 112.48 224.97 Interest on term loan 100.05 195.93 161.75 121.73 81.71 41.69 5.84 Total Fixed Expenses 270.71 555.89 524.74 485.24 445.59 405.95 370.49 BREAK EVEN POINT Production (kg.) 788519 Sales (Rs. lacs) Capacity Utilisation 49.02% 45.81% 43.75% 40.54% 37.33% 34.11% 31.23% CASH BREAK EVEN 460878 877347 804067 699504 594660 489256 394596 Sales (Rs. Lacs) 711.46 944.16 776.81 626.52 28.65% 27.27% 24.99% 21.74% 18.48% 15.21% 12.27%

If sale price is reduced by 5%
SENSITIVITY ANALYSIS If sale price is reduced by 5% 2012 2013 2014 2015 2016 2017 2018 Sales Less : 5% 114.23 242.67 247.68 247.74 Revised sales Reduced by Net profit before tax 224.42 572.27 614.06 651.26 687.54 723.77 755.72 Revised Net profit before tax 110.19 329.60 366.38 403.51 439.80 476.03 507.97 Less : 33.33% 36.74 109.89 122.15 134.53 146.63 158.71 169.36 Profit after Tax 73.46 219.71 244.23 268.98 293.17 317.32 338.62 Add back : Interest on term loan 100.05 195.93 161.75 121.73 81.71 41.69 5.84 Depreciation 112.48 224.97 Preliminary Expenses 1.25 Net cash accruals 287.24 641.86 632.20 616.93 601.10 585.23 570.67 Repayment obligation Interest Principal 0.00 174.00 348.00 Total Repayment 369.93 509.75 469.73 429.71 389.69 179.84 D.S.C.R 2.87 1.74 1.24 1.31 1.40 1.50 3.17 Average D.S.C.R 1.61 times Taxable profit %

If raw material price is increased by 5%
SENSITIVITY ANALYSIS If raw material price is increased by 5% 2012 2013 2014 2015 2016 2017 2018 Raw material Add : Increase by 5% 70.21 145.00 148.06 Increased cost of Raw material Increase by Net profit before tax 224.42 572.27 614.06 651.26 687.54 723.77 755.72 Revised Net profit before tax 154.21 427.27 466.00 503.20 539.49 575.71 607.66 % 51.41 142.45 155.37 167.77 179.87 191.94 202.59 Profit after Tax 102.80 284.82 310.64 335.43 359.62 383.77 405.07 Add back : Interest on term loan 100.05 195.93 161.75 121.73 81.71 41.69 5.84 Depreciation 112.48 224.97 Preliminary exps. written off 1.25 316.58 706.97 698.61 683.38 667.55 651.68 637.12 Repayment obligation Interest Principal 0.00 174.00 348.00 Total Repayment 369.93 509.75 469.73 429.71 389.69 179.84 D.S.C.R 3.16 1.91 1.37 1.45 1.55 1.67 3.54 Average D.S.C.R 1.78 times Taxable profit Reduced by

KEY FINANCIAL PARAMETERS
For the year ending 31st March 2012 2013 2014 2015 2016 2017 2018 Gross profit to sales 21.37% 22.55% 22.50% 22.44% 22.36% 22.28% 22.21% Operating profit to sales 9.82% 11.79% 12.40% 13.14% 13.88% 14.61% 15.25% Net profit to sales 7.54% 8.61% 8.68% 8.91% 9.16% 9.45% 9.71% Interest to sales 6.57% 6.10% 5.54% 4.73% 3.92% 3.11% 2.39% Raw material to sales 61.47% 59.75% 59.78% 59.76% Current Ratio 1.37 1.88 2.10 2.42 2.76 3.11 3.65 Debt Equity Ratio 1.61 1.04 0.63 0.37 0.18 0.05 0.00 TOL /TNW 1.65 1.15 0.79 0.54 0.35 0.26 DSCR (Normal) 3.86 2.27 1.68 1.77 1.89 3.96 DSCR (Normal) Maximum Minimum Average 2.06 times IRR-PROJECT (15 years) Post tax 33.20% Pre tax 44.72% Sensitivity analysis - D.S.C.R Sales price reduced by 5% 2.87 1.74 1.24 1.31 1.40 1.50 3.17 Raw material cost inc by 5% 3.16 1.91 1.45 1.55 1.67 3.54 1.78 Break Even Analysis Production (Kgs.) 788519 Sales (Rs. Lacs) 1217 2340 2234 2071 1907 1742 1595 Capacity Utilisation 49.02% 45.81% 43.75% 40.54% 37.33% 34.11% 31.23% Cash Break Even Analysis 460878 877347 804067 699504 594660 489256 394596 711 1393 1276 1111 944 777 627 28.65% 27.27% 24.99% 21.74% 18.48% 15.21% 12.27%

Thank You.. PKM Advisory Services Pvt. Ltd.
A , Safal Pegasus, Nr. Prahalad Nagar Garden, 100 Ft Road, Anand Nagar Road, Prahaladnagar, Ahmedabad Phone no : Fax: Web:

Working Capital Management

Similar presentations

Presentation on theme: "Working Capital Management"— Presentation transcript:

Similar presentations

About project

Feedback

Log in

Auth with social network:

Working Capital Management

Similar presentations

Presentation on theme: "Working Capital Management"— Presentation transcript:

Similar presentations

About project

Feedback