REPORT ON SUMMER TRAINING

ON
WORKING CAPITAL MANAGEMENT

UNDER TAKEN AT
GANGOTRI OVERSEAS PANIPAT.
Sherpur, G.T. Road, Ludhiana

In the partial fulfillment of the

requirements for the award degree
of
MASTER OF BUSINESS ADMINISTRATION

Submitted by:
MANJINDER SINGH

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ACKNOWLEDGEMENT

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ACKNOWLEDGEMENT
It is always difficult to acknowledge, so precocious adapt as that of learning, as it is only a debt
that is difficult to repay expect through gratitude. There are occasions where mere expressions of
words stand nowhere near the feeling felt. The completion of this training with its report is such
one occasion.
I take this opportunity to express my warmest appreciations and give special recognition to all
those individual who have contributed immensely to make this project report.
The formal statement of acknowledgement will hardly meet the ends of justice in the matter of
expressing a sense of gratitude to my college authorities Coordinator Mrs. Shelly, lect. Miss
Swati, Mr. R.M. Sood {finance controller of Gangotri Overseas panipat.} and whole team of
finance dept. of Gangotri Overseas panipat for giving practical dimensions to my theoretical
studies in the form of training and framing report which is suitable and highly beneficial.
Above all, I accord cordial regards to my loving parents and grateful to almighty for bringing me
up in an atmosphere of life and confidence and infusing in me the spirit to the face challenges of
life bravely that made me really work towards the goal of success.
Last but not least the least. I express my gratitude to all those to have helped me, guided me,
encourage me but have been inadvertently left out.
MANJINDER SINGH

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BONAFIDE CERTIFICATE

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EXECUTIVE SUMMARY

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EXECUTIVE SUMMARY
GANGOTRI OVERSEAS PANIPATLIMITED (OWM) is a flagship company of the Nahar
group of the companies. The Nahar group is an industrial conglomerate based at Ludhiana in
Punjab with the group turnover in excess of Rs. 19000 million for the 2006. GANGOTRI
OVERSEAS PANIPAT is the company of NAHAR GROUP Under the stewardship of his son,
SHRI JAWAHAR LAL OSWAL; the company diversified and expanded its business interest
beyond yarns. Garments, hosiery products. GANGOTRI OVERSEAS PANIPAT. is the flagship
company of NAHAR GROUP. It has variety in its basket. The company are registered owners of
well-known trade name MONTE CARLO for selling company woollen hosiery and cotton
garments Monte Carlo has been recognized as super brand for woollen hosiery garments since
fiscal 2003 by international society of super brands. India contributes to about 25% share in the
world trade of cotton yarn.

The project entitled Working Capital Management and its Appraisal in GANGOTRI
OVERSEAS PANIPAT. The term of study was kept limited to make the title true. The purpose of
the report is to get the in depth understanding of the process of working capital management.
With the growing Indian economy and the government policies for infrastructure the demand for
garments is increasing and seeing this as an opportunity is under taking many new projects for
expansion of the production which are under implementation for increasing the capacity of the
plants. Because the textile industry is a sun rising company which means that three basic needs
of the people are cloth, meal and house. So the one of thing that is cloth produced in textile
industry. So, it is sun rising company. Working capital has been analyzed in two ways overall
study of the working capital of GANGOTRI OVERSEAS PANIPAT.
Borrowings are an important ingredient of funding a business entity. The lenders must feel
comfortable with their clients and GANGOTRI OVERSEAS PANIPAT. enjoys this position
among their lenders. Borrowing is done for working capital requirement i.e., to meet the day to
day requirement for smooth functioning of the production, and term loans for projects of
capacity expansion. Major portion of the borrowing is done from banks at better rate of interest.
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The performance of the textile division of the company during the year was satisfactory. The
annual turnover the nahar group is 19000 million and alone company have annual turnover of
550 million. The Company has posted yet another impressive for the 2007-08 results, which has
surpassed all respective previous levels. It has shown substantial growth in turnover, cash profit,
profit before tax and profit after tax.
The objective of this project work is to focus on the working capital of the Gangotri Overseas
panipat. The project contain the basic postulates of working capital, procedure of analysis of
working capital, ratio being used to define the working capital and the impact of working capital
in the company in case of excess or inadequacy. Also, the project contains analysis of estimation
of working capital requirement and the procedure to estimate working capital requirement in
manufacturing and trading concern and from the data available it can be concluded that it holds a
very strong position in the market.
Setting up an organization for the working capital management is the
precondition to control working capital effectively and sustainably. Firstly, it is
essential to define who is responsible for the controlling process. The figure
must be calculated, planned and improved. Therefore further key ratios must
be defined and targets set. In addition, continual target-performance
comparisons

must be

conducted

as

well

as

defining

measures

for

improvement. These measures advance the effectiveness of the working

capital key processes; the forecast-to-fulfill process, the order-to-cash
process and the purchase-to-pay process.

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TABLE OF CONTENTS
S.NO.
1

CHAPTER
NO.

TITLE

Page .No.

CHAPTER.1 INTRODUCTION TO WORKING CAPITAL

9-19

(A)

WORKING CAPITAL MEANING & SCOPE

11

(B)

MPBF

16

(C)

REVIEW OF LITERATURE

17

CHAPTER.2 ABOUT TEXTILE INDUTRY & COMPANY PROFILE

20-48

(A)

OVERVIEW OF INDIAN TEXTILE INDUSTRY

21

(B)

LEADING TEXTILE MILLS

32

(C)

COMPANY PROFILE

35

(D)

COMPANY MAJOR EVENTS

42

10

(E)

AWARDS

44

11

(F)

PRODUCTS

45

12

(G)

EXPORT MARKETS

48

13

CHAPTER.3 OBJECTIVES & RESEARCH METHODOLOGY

49-52

14

(A)

OBJECTIVES OF THE STUDY

50

15

(B)

RESEARCH METHODOLOGY

51

16

(C)

SOURCES OF DATA

52

17

CHAPTER.4 WORKING CAPITAL ANALYSIS OWM

53-76

18

(A)

INTRODUCTION TO W.C. ANALYSIS

54

19

(B)

KEY WORKING CAPITAL RATIOS

55

20

(C)

STATEMENT

SHOWING

CHANGE

IN

WORKING

57

CAPITAL FOR GANGOTRI OVERSEAS PANIPAT

21

(D)

CALCULATION OF WORKING CAPITAL FOR OWM

22

(E)

ANALYSIS OF VARIOUS COMPONENTS OF W.C

60-67

23

(F)

WORKING CAPITAL RATIOS OF COMPANY

68-76

24

CHAPTER. 5CONCLUSION & SUGGESTIONS

59

77-80

25

(A)

CONCLUSION

78

26

(B)

SUGGESTIONS

80

27

BIBLIOGRAPHY
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81-82

27

ANNEXURES

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INTRODUCTION
TO
WORKING CAPITAL

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(A) WORKING CAPITAL - Meaning of Working Capital

Capital required for a business can be classified under two main categories via,
1) Fixed Capital
2) Working Capital
Every business needs funds for two purposes for its establishment and to carry out its dayto-day operations. Long terms funds are required to create production facilities through purchase
of fixed assets such as p & m, land, building, furniture, etc. Investments in these assets represent
that part of firms capital which is blocked on permanent or fixed basis and is called fixed
capital. Funds are also needed for short-term purposes for the purchase of raw material, payment
of wages and other day to- day expenses etc.
These funds are known as working capital. In simple words, working capital refers to that part of
the firms capital which is required for financing short- term or current assets such as cash,
marketable securities, debtors & inventories. Funds, thus, invested in current assts keep
revolving fast and are being constantly converted in to cash and this cash flows out again in
exchange for other current assets. Hence, it is also known as revolving or circulating capital or
short term capital.
CONCEPT OF WORKING CAPITAL
There are two concepts of working capital:
1. Gross working capital
2. Net working capital
The gross working capital is the capital invested in the total current assets of the enterprises
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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In a narrow sense, the term working capital refers to the net working. Net working capital is the
excess of current assets over current liability, or, say:
NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.
Net working capital can be positive or negative. When the current assets exceeds the current
liabilities are more than the current assets. Current liabilities are those liabilities, which are
intended to be paid in the ordinary course of business within a short period of normally one
accounting year out of the current assts or the income business.
CONSTITUENTS OF CURRENT LIABILITIES
1. Accrued or outstanding expenses.
2. Short term loans, advances and deposits.
3. Dividends payable.
4. Bank overdraft.
5. Provision for taxation , if it does not amt. to app. 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.
The gross concept is sometimes preferred to the concept of working capital for the following
reasons:
1. It enables the enterprise to provide correct amount of working capital at correct time.
2. Every management is more interested in total current assets with which it has to operate then
the source from where it is made available.
3. It take into consideration of the fact every increase in the funds of the enterprise would
increase its working capital.
4. This concept is also useful in determining the rate of return on investments in working capital.
The net working capital concept, however, is also important for following reasons:

It is qualitative concept, which indicates the firms ability to meet to its operating expenses
and short-term liabilities.

IT indicates the margin of protection available to the short term creditors.

It is an indicator of the financial soundness of enterprises.
It suggests the need of financing a part of working capital requirement out of the permanent
sources of funds.
CLASSIFICATION OF WORKING CAPITAL
Working capital may be classified in two ways:
o
On the basis of concept.
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o
On the basis of time.
On the basis of concept working capital can be classified as gross working capital and net
working capital. On the basis of time, working capital may be classified as:
Permanent or fixed working capital.
Temporary or variable working capital
PERMANENT OR FIXED WORKING CAPITAL
Permanent or fixed working capital is minimum amount which is required to ensure effective
utilization of fixed facilities and for maintaining the circulation of current assets. Every firm has
to maintain a minimum level of raw material, work- in-process, finished goods and cash balance.
This minimum level of current assets is called permanent or fixed working capital as this part of
working is permanently blocked in current assets. As the business grow the requirements of
working capital also increases due to increase in current assets.
TEMPORARY OR VARIABLE WORKING CAPITAL
Temporary or variable working capital is the amount of working capital which is required to
meet the seasonal demands and some special exigencies. Variable working capital can further be
classified as seasonal working capital and special working capital. The capital required to meet
the seasonal need of the enterprise is called seasonal working capital. Special working capital is
that part of working capital which is required to meet special exigencies such as launching of
extensive marketing for conducting research, etc.
Temporary working capital differs from permanent working capital in the sense that is required
for short periods and cannot be permanently employed gainfully in the business.
EXCESS OR INADEQUATE WORKING CAPITAL
Every business concern should have adequate amount of working capital to run its business
operations. It should have neither redundant or excess working capital nor inadequate nor
shortages of working capital. Both excess as well as short working capital positions are bad for
any business. However, it is the inadequate working capital which is more dangerous from the
point of view of the firm.

FACTORS DETERMINING THE WORKING CAPITAL REQUIREMENTS

1.
2.
3.
4.

NATURE OF BUSINESS
SIZE OF THE BUSINESS
PRODUCTION POLICY
LENTH OF PRDUCTION CYCLE

5. SEASONALS VARIATIONS
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6. WORKING CAPITAL CYCLE

7. RATE OF STOCK TURNOVER
8. CREDIT POLICY
9. BUSINESS CYCLE
10. RATE OF GROWTH OF BUSINESS
11. EARNING CAPACITY AND DIVIDEND POLICY
12. PRICE LEVEL CHANGES

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Financing Working Capital

Now let us understand the means to finance the working capital. Working capital or current
assets are those assets, which unlike fixed assets change their forms rapidly. Due to this nature,
they need to be financed through short-term funds. Short-term funds are also called current
liabilities. The following are the major sources of raising short-term funds:
I. Suppliers Credit
At times, business gets raw material on credit from the suppliers. The cost of raw material is paid
after some time, i.e. upon completion of the credit period. Thus, without having an outflow of
cash the business is in a position to use raw material and continue the activities. The credit given
by the suppliers of raw materials is for a short period and is considered current liabilities. The
loans are available for creating the following current
Assets:
A. Stock of Raw Materials

b. Stock of Work in Process

c. Stock of Finished Goods

d. Debtors

Banks give short-term loans against these assets, keeping some security margin.
The advances given by banks against current assets are short-term in nature and banks have the
right to ask for immediate repayment if they consider doing so. Thus bank loans for creation of
current assets are also current liabilities.
ii. Promoters Fund
It is advisable to finance a portion of current assets from the promoters funds. They are longterm funds and, therefore do not require immediate repayment.
These funds increase the liquidity of the business.

Bank Credit (Working Capital Finance by Commercial Banks )

Bank credit is the primary institutional source of working capita finance in India. The different
forms in which the banks normally provide loans and advances are as follows:
a. Loans
b. Cash Credits
c. Overdrafts
d. Purchasing and Discounting of bills:

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(B)

Computation

of

Maximum

Permissible

Bank

Finance(MPBF):
The Tandon Committee had suggested three methods for determining the maximum permissible
bank finance (MPBF).
They are
Method 1: MPBF=0.75(CA-CL)
Method 2: MPBF=0.75(CA)-CL
Method 3: MPBF=0.75(CA-CCA)-CL
Where CCA=Core Current Assets- this represents the permanent component of working capital.
e.g. Total current assets required 40,000
Current liabilities other than bank borrowings 10,000
Core current assets 5,000
1st Method
Total current assets required 40,000
Less current liabilities 10,000
Working Capital Gap 30,000
Less 25% from Long term sources 7,500
Maximum permissible bank borrowings 22,500
2nd Method
Current Assets required 40,000
Less 25% to be provided from long term funds 10,000
Less Current Liabilities 30,000
Maximum permissible bank borrowings 20,000
3rd Method
Current assets 40,000
Less Core Current assets 5,000
35,000
Less 25% to be provided from long term funds 8,750
26,250
Less current liabilities 10,000
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Maximum permissible bank borrowings 16,250 (C) REVIEW OF LITERATURE

Stephen Bush (2008) Commercial borrowers sometimes overlook short-term options for
commercial loans. In the current recessionary conditions, it is wise to explore all working capital
management options. This article will shed some light on shorter-term choices such as short-term
commercial mortgages and business cash advances. Due to misunderstandings about long-term
commercial financing, short-term commercial loans are often not considered properly. Although
long-term commercial real estate financing options are often appropriate, there are practical
short-term business financing choices that will be more workable and profitable for commercial
borrowers. The most critical short-term commercial financing techniques typically include shortterm merchant cash advance and credit card processing programs and commercial real estate
loan programs. Both working capital funding approaches are frequently a source of confusion for
business owners.
Bebehuk L., and L. stole (2009) Working capital is the cash needed to carry on operations
during the cash conversion cycle, i.e. the days from paying for raw materials to collecting cash
from customers. Raw materials and operating supplies must be bought and stored to ensure
uninterrupted production. Wages, salaries, utility charges and other incidentals must be paid for
converting the materials into finished products. Customers must be allowed a credit period that is
standard in the business. Only at the end of this cycle does cash flow in again.
Allensius (2009) there will usually be only a few business financing sources that are regularly
successful at executing the credit card financing and processing. There are key difficulties to
avoid with a working capital advance, and selecting an effective funding source is essential to an
appropriate business cash advance program.A long-term commercial mortgage is appropriate for
many businesses that own commercial property. Commercial property should be financed with
an appropriate combination of short-term and long-term funding. It is wise to consider long-term
Business financing of up to 30 years when a longer-term commercial real estate loan is feasible.

Page 17 of 86

Gamble, Richard H. (2005) Working capital management (WCM) is a holistic approach to

managing capital that can increase a company's cash flow and operational profits, but has yet to
receive widespread acceptance. WCM is unlike traditional cash management with its emphasis
on float and collection and disbursement programs. WCM addresses the full time-line from raw
material to payment, and strives to free capital wherever possible. Just-in-time inventory
management is a good example of WCM. WCM runs counter to the standard divisional lines
around which most companies are organized; its acceptance may increase, however, as US
businesses strive to become more efficient and competitive, and as financial professionals grow,
learn, and assume greater responsibilities for their companies' futures.
Dittmar, A. and J. Mahrt, 2005 Working capital management is important part in firm financial
management decision.

An optimal working capital management is expected to contribute

positively to the creation of firm value. To reach optimal working capital management firm
manager should control the tradeoff between profitability and liquidity accurately. The purpose
of this study is to investigate the relationship between working capital management and firm
profitability. Cash conversion cycle is used as measure of working capital management. This
study is used panel data of 1628 firm-year for the period of 1996-2006 that consist of six
different economic sectors which are listed in Bursa Malaysia. The coefficient results of Pooled
OLS regression analysis provide a strong negative significant relationship between cash
conversion cycle and firm profitability. This reveals that reducing cash conversion period results
to profitability increase. Thus, in purpose to create shareholder value, firm manager should
concern on shorten of cash conversion cycle till accomplish optimal level.
Beneda, Nancy, Zhang, Yilei 2006 the current study contributes to the literature by examining
impact of working capital management on the operating performance and growth of new public
companies. The study also sheds light on the relationship of working capital with debt level, firm
risk, and industry. Using a sample of initial public offerings (IPO's), the study finds a significant
positive association between higher levels of accounts receivable and operating performance.
The study further finds that maintaining control (i.e. lower amounts) over levels of cash and
securities, inventory, fixed assets, and accounts payables appears to be associated with higher
operating performance, as well. We find that IPO firms which are experiencing unusually high
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growth tend not to perform as well as those with low to moderate growth. Further firms which
are experiencing high growth tend to hold higher levels of cash and securities, inventory, fixed
assets, and accounts payables. These findings tend to suggest that firms are willing to sacrifice
performance (accept low or negative operating returns) to increase their growth levels. The
higher level of growth is also associated with higher operating and financial risk. The findings of
this study suggest that perhaps IPO firms should stay more focused on their operating
performance than on maintaining high growth levels.
James Michael Wahlen 08 In this paper we review the academic evidence on earnings
management and its implications for accounting standard setters and regulators. We structure our
review around questions likely to be of interest to standard setters. Specifically, we review the
empirical evidence on which particular accruals are used to manage earnings, the magnitude and
frequency of any earnings management, and whether earnings management affects resource
allocation in the economy. Our review identifies a number of important opportunities for future
research on earnings management.

D'Attilio, David F. Net working capital forecasts play a vital role in cash flow projections. Care
should be taken to create accurate projections of net workingcapital, defined as current assets
minus current liabilities, by avoiding errors in financial data. Analysis reveals that small
differences in asset/liability reports can cause significant distortions in working capital forecasts.
In order to achieve reliable forecasts, it is necessary to adopt a combination of macro and micro
approaches which have been proven to produce reasonably accurate data.

Neung Kim, Kyungho Kim The three best macro-economic indicators for 24 various industries
are identified using E.I. Altman's Z-score. The Altman's Z-score is used to measure overall
business financial conditions. These are the prime bank rate, the three-month US Treasury Bill
rate and the corporate AAA bond rate. The three variables are found to be relevant predictors for
business financial conditions since they have highly negative correlations with Z-scores.

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ABOUT TEXTILE INDUTRY

&
COMPANY PROFILE

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(A) Overview of the Indian textile industry

Segments of Indian Textile Industry
Indian Textile Industry can essentially be categorized into two segments:1. Organized Textile Industry
2. Unorganized Textile Industry Unorganized sector is the dominant part in this industry which
mainly utilizes the traditional practices (woven or spun ) in cloth production and hence is
labor intensive in nature. This industry is characterized by the production of clothes either
through weaving or spinning with the help of hands. The decentralized nature is considered
as another important feature of the unorganized textile industry in India.
The other half of the Indian Textile industry is a highly organized one with immense importance
on capital intensive production process. This sector is characterized by sophisticated mills where
technologically advanced machineries are utilized for mass production of textile products.

Sub-Sectoral Categorization of Indian Textile Industry

Textile Industry based on fiber produced through man made means or natural cotton
Yarn industry utilizing fiber or filament of the man made type
Textile industry involved in the production of wool, its derivatives and final woolen products
Production, processing of Jute and the textile industry based on it
Textile industry involved in the mass production of natural silk along with derivative and

final products from silk

Handloom Industry
Handicrafts industry which is basically unorganized in nature

Sub-Categorized sectors of the Indian textile Industry

Textile Industry based on fiber produced through man made means or natural cotton In the whole
Indian textile industry, this sector has come as the largest producer of textile products. This
industry has also proved its potential in employing the maximum number of people in the entire
industry which has been calculated to be around a whooping one million workers. As per the
latest records (31.01.2007) of Ministry of Textiles, the total number of mills in this particular
sector is 1818 in number. The installed capacity of all these mills accumulates to 35.37 million
spindles and 0.45 million rotors
During the year 2000-2001, the total amount of spun yarn produced was 3160 million kgs. This
amount saw an increase of around 400 million kgs within the period of 2000-2001 to 2005-2006.
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Spun Yarn industry can again be divided into two sub-sectors: Cotton Yarn producing industry the production of this industry type is heavily dependent on
the yearly production of cotton which again depends on the vagaries of nature. Hence it has
been observed that the rate of production in this sector shows fluctuating trend.
Completely non cotton blended yarn producing industry
This industry type is a consistent performer where its rate of production has increased at a
consistent rate. It has been observed that between the period 1999 and 2005, capacity utilized in
this sector has varied anything between 80% and 93%.
Organized sector in Textile Industry is passing through a stage of stagnation and the main reason
behind it is transformation in the structural set-up of the industry. It has been found out that the
weaving sector is delinked from the spinning sector which has led to the rise of power looms of
decentralized nature. Over the years, the production capacity of this organized sector has seen an
absolute decrease of 0.54 lakh between March 2000 and January 2007.
Cloth production has also evidenced a declining trend during 2000-2006 with an absolute
decrease of ninety four million square meters. The annual growth rate of total cloth production in
the textile industry has been calculated to be around 5.24 % between 2000-2001 to 2005-2006.
But stratified result of this industry show that during the above mentioned period, the organized
sector of this industry has posted fluctuating results whereas the unorganized one has performed
positively with an yearly rate of growth amounting to 5.4%.

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Investment In Indian Textile Industry

Investment in Indian Textile Industry
The scenario of investment in the Indian textile industry started to change after the inception of
the special Textile Package during the 2003-2004 budgets. The recommendations made in the
budget included the reforms that are required to be made in the fiscal policy of the Indian textile
Industry for attracting investment in this industry. The policy matters associated with
restructuring of debt for financial viability of this industrial sector are also being addressed in
this budget. A fund was set up in accordance with the recommendations of the aforesaid budget
with an initial principal amount of Rs. 3000 crores. This fund was meant for restructuring of the
textile sector.
Factors responsible for wooing the investors in Indian textile industry: The size of the textile along with apparel market in India is quite big.
Performance of this industry has been consistent right from the start of the new millennium.
Availability of the skilled labor in India is comparatively cheap in relation to the same in
other parts of the world.
The policies related to the Foreign Direct Investment in India are comparatively lenient and
are transparent in nature among all the developing countries.
There is no limit on foreign direct investment in the textile industry and hence 100% direct
investment can be done by the foreign capitalists in the Indian textile industry.
Foreign Investments done in the Indian Textile Industry through the automatic route offers a
hassle-free way of investing. These investments are not required to be approved by the
government or the apex bank of India, RBI. The foreign investors are only required to make a
notification to the regional office of the apex bank only after receiving the receipt of the
remittance. This notification is required to be done within thirty days from the date of
receiving the remittance. The ministry concerned with the development of Textile Industry in
India has formed a special cell for attracting FDI in this sector. Objectives of this special cell
for wooing FDI are : This cell helps the willing foreign companies to find out viable partners meant for floating a
joint venture company in order to produce textile products.

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 FDI special cell acts as the mediator between the foreign investor and the different
organizations for setting up the textile industry. The specialized helps that are given by this
cell involve advisory support along with assistance.
At the time of operation of the textile industry set by the foreign investor certain problems
may crop up. These problems are sorted out by the FDI cell.
FDI cell monitors as well as maintains the data related with the total production of the textile
sector. They also collect the stratified data of production by both domestic industry as well as
the industry set up by the foreign investor. In the financial year 2005-2006, it has been found
out that the percentage share of the textile industry in the total foreign investment done was
1.02%.
As a part of domestic textile sector expansion, the companies of Indian origin are also not far
behind in making investments. Arvind Mills Limited is expanding its production as well as
capacity base through the construction of two new industrial set ups in Bangalore and
Ahmadabad.

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Government Policies Relating to the Textile Industry in India

Introduction
The Indian textile industry is one of the largest industries in the world. The Ministry of Textiles
in India has formulated numerous policies and schemes for the development of the textile
industry in India. Some of them are detailed in the following sections.
National Textile Policy
The National Textile Policy was formulated keeping in mind the following objectives:
Development of the textile sector in India in order to nurture and maintain its position in the
global arena as the leading manufacturer and exporter of clothing.
Maintenance of a leading position in the domestic market by doing away with import
penetration.
Injecting competitive spirit by the liberalization of stringent controls.
Encouraging Foreign Direct Investment as well as research and development in this sector.
Stressing on the diversification of production and its up gradation taking into consideration
the environmental concerns.
Development of a firm multi-fiber base along with the skill of the weavers and the craftsmen.
Such goals are set to meet the following targets:

The size of textile and apparel exports must reach a level of US $50 billion by the year 2010.
The Technology Up gradation Fund Scheme should be implemented in a strict manner.
The garments industry should be removed from the list of the small scale industry sector.
The handloom industry should be boosted and encouraged to enter into foreign ventures so as
to compete globally. The National Textile Policy has also formulated rules pertaining to
certain specific sectors. Some of the most important items in the agenda happens to be the
availability and productivity along with the quality of the raw materials. Special care is also
taken to curb the fluctuating price of raw materials. Steps have also been taken to raise silk to
the international standard.

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Government policy on cotton and man-made fiber:One of the principal targets of the government policy is to enhance the quality and production of
cotton and man-made fiber. Ministry of Agriculture, Ministry of Textiles, cotton growing states
are primarily responsible for implementing this target.
Other thrust areas:Information Technology
Information technology plays a significant role behind the development of textile industry in
India. IT (Information Technology) can promote to establish a sound commercial network for the
textile industry to prosper.
Human Resource Development
Effective utilization of human resource can strengthen this textile industry to a large extent.
Government of India has adopted some effective policies to properly utilize the manpower of the
country in favor of the textile industry.
Financing arrangement
Government of India is also trying to encourage talented Indian designers and technologists to
work for Indian textile industry and accordingly government is setting up venture capital fund in
collaboration with financial establishments.
Acts
Some of the major acts relating to textile industry include:
Central Silk Board Act, 1948
The Textiles Committee Act, 1963
The Handlooms Act, 1985
Cotton Control Order, 1986
The Textile Undertakings Act, 1995 Government of India is earnestly trying to provide all the
relevant facilities for the textile industry to utilize it's full potential and achieve the target. The
textile industry is presently experiencing an average annual growth rate of 9-10% and is expected
to grow at a rate of 16% in value , which will eventually reach the target of US $ 115 billion by
2012. The clothing and apparel sector are expected to grow at a rate of 21 %t in value terms.

Page 26 of 86

Textile Industry Exports:Introduction

Textile industry plays a significant role in the growth of Indian economy and it is an important
component of global trade. Textile industry accounts for about one third of India's total export
earnings. It is regarded as the second largest industry of India and is the largest foreign export
earner, accounting for 35% of the gross export earnings in trade. During 1992-93 and 2001-02,
textile exports recorded an increase at a compound annual growth rate of 14.01%. Handloom and
cotton are the two most significant sectors in textile industry. These two sectors together
contribute the major portion of total textile export in India.

Trading partners
Leading trading partners of India are Malaysia, Australia, Kazakhstan, USA, South Africa,
Romania, Argentina, Egypt, Germany, Finland, and Turkey.
India's export to Malaysia
Malaysia imports various types of textile products from India to meet the requirements of raw
materials for it's emerging garment industry. Malaysia's total textile imports are estimated to
exceed US$ 1.5 billion annually. Malaysia's major importing products include woven man-made
fiber fabrics, apparel accessories, textile yarn, knitted and crocheted fabrics, and womens
apparel.

Page 27 of 86

India's export to USA

USA is regarded as the largest textile and apparel market in the world, which amounts to over
$200 billion annually. In 2006, about 45% of the U.S. market demand was met with imported
products, which accounted for 20% of the overall global textile and apparel imports. In 2003, the
total imports of clothing and textiles by USA was 80% (US $ 71 bn) and 20% (US $ 18 bn),
respectively. Asia contributed the most, specifically India. India basically supplied readymade
garments to USA.
India's export to Australia
Australia is considered as one of the most open textile markets in the world. Major textile
imports include apparels and made-ups under chapter 62, 61 and 63, specifically polyester-cotton
and polyester-viscose types. Bulk of cotton and hand-made fibers are:-

Also imported from countries like India.

Page 28 of 86

Indian exports of textiles to Germany

Germany can be regarded as one of the leading importers of Indian handmade fiber textiles.
Germany is also an important market in EU (European Union), specifically for textile and
clothing, with a total market size of about US $ 34 billion (in 2005).During 2005-06, the total
German imports of textile products from India amounted to Rs. 4714.59 crores and in the same
year, the total imports value of Synthetic and Rayon textiles from India amounted to Rs. 254.63
crores, showing a growth of 58.43% comparing to the performance of previous year.
Indian exports of textiles to EU (European Union)
EU overpowered USA as becoming the largest market for textiles and clothing in the world. Asia
predominates the EU market in both clothing and textiles, with 30% (US $ 30 bn) and 17 % (US
$ 8 bn) share, respectively. India is one of the leading suppliers of textile products to the EU
market and ranked fourth, ahead of other textile exporters like Mexico, Bangladesh and Turkey,
with a market share of 5.2% (US $ 0.45 bn).

Current trend Industry sources reveal that India's textile exports are likely to fall short by over
16% from the expected target. This is happening because of an increase in value of money and
slowing down of investment. Shekhar Agarwal, chairman, Confederation of Indian Textile
Industry opines that in 2007, the textile exports in India will not surpass $ 20.5 billion mark,
witnessing a negative growth in exports, specifically in segments like garments. Garments
accounts for about half of the overall textile exports by India. Agarwal also expressed his doubts
about implementing the projected investment of Rs. 1,94,000 crore in the 11th Five Year Plan
Page 29 of 86

(2007-12). Source from Business Standard reveals that the Indian government is expected to
export around 20 % more raw cotton than before.
Indian textile exports to USA and China are growing rapidly. B.K. Patodia, chairman of India's
Cotton Textiles Export Promotion Council, expressed that China and India are speedily
becoming the two biggest textile players in the world.
CRISIL (Credit Rating Information Services of India Limited), India's leading Ratings, Research,
Risk and Policy Advisory Company predicts that India's textile export earnings will increase
from USD 17 billion (FY 2006) to around USD 40 billion by FY(Financial Year) 2011.
Global Trade in Textile and Clothing
In 2003, the overall global trade in textiles and clothing amounted to US $ 385 billion, of which
textiles alone contributed 43%. Developed countries contribute about one third of the total global
exports of textile and clothing.

Page 30 of 86

Leading Indian Textile Mills

Some of the leading Textile Mills in India include
Adarsh Textile Mills : Manufacturer and exporter of good quality woolen and synthetic
blankets.
Amritsar Swadeshi Woolen Mills : Pioneer in manufacturing heavy woolen yarn and largest
manufacturer of fabric.
Aroon Mills : Manufacture of textile auxiliaries
Mohan Thread Mills : Manufacturer of high quality embroidery yarn and threads

Market estimation
In 1997, the overall Indian market for the textile machinery was approximated at USD 895
million and was estimated to grow at an average annual growth rate of 6%.

Factors responsible behind the growth of textile machinery in India

Some of the major factors responsible behind the growth of textile machinery sector are:
An immense demand of Indian apparels and textiles in the international market
Low custom duties on imported textile machinery
Less tight government restrictions on imported goods Major trading partners regarding
import of textile machineries include U.S., Germany, Switzerland and U.K. India ranks
second in the global textile industry and accounts a major portion to the overall Indian
exports. For the sustenance of this growth and to maintain the competence in the
international market, the textile mills in India need to be modernized.

Page 31 of 86

(B) Leading Textile mills in India :Some of the major textile mills in India are:
1. Raymond Ltd., Mumbai
2. Grasim Industries Ltd., Nagda
3. DCM Textiles, New Delhi
4. S. Kumars, Kolkata
5. Reliance Industries, Ahmedabad
6. Mafatlal Industries, Mumbai
7. Arvind Mills Ltd., Ahmedabad
8. Ashima Syntex, Ahmedabad
9. NAHAR SPINING, LUDHIANA
10. Hisar Spinning Mills Ltd.
11. Anand Silk Mills, Valsad
12. Titex Silk Mills,Valsad
13. Shree sainath Silk Mills, Valsad
14. Shreeji Trading Company, Surat
15. Garden Silk Mills Ltd., Surat
16. Raj Rayon Ltd., Mumbai
17. The Bombay Dyeing & mfg. Pvt Ltd., Mumbai
18. Shiyaji Silk Mills Ltd, Thane
19. Nirmala Fabrics, Thane

Page 32 of 86

SWOT ANALYSIS OF INDIAN TEXTILE INDUSTRY

Strength

Post 2005, removal of quota restrictions to give a major boost.

Export target in textile at USD 50 Billion by 2010.

Low per capita consumption in India (2.8 vs. Global average of 6.8).

Cost competitiveness.

Weeknesses

Fragmented Industry

Effect of Historical Government Policies

Technological Obsolescence
Oppurtunities

Indian companies need to focus on Product Development

Increased use of CAD to develop designing capabilities

Investing in Trend Forecasting to enable the growth of industry

Threats

Competition in Domestic Market

Need to improve the Working Conditions of the people who are involved in this profession.

Need to revamp Consumer Consciousness

Tackle Chinese Aggression over the International Market

Page 33 of 86

RECOMMENDATIONS

Setting up Textile Industries oriented SEZs

Starting up new courses like Textile Manufacturing and Textile Technology at ITIs and
Engineering Institutes

Liberalized labour laws, tax and other benefits of a Special Economic Zone need to be
implemented

Access to high quality and cost-effective manpower

Excellent connectivity by road, rail air and ports and Single-window clearance

Page 34 of 86

(C) COMPANY PROFILE

GANGOTRI OVERSEAS PANIPATLIMITED (OWM) is a flagship company of the Nahar
group of the companies. The Nahar Group is an industrial conglomerate based at Ludhiana in
Punjab with the group turnover in excess of Rs. 19000 million. The Nahar Group is one of the
oldest and well recognized businesses in India. The company was incorporated in 1949 by late
Mr. Vidiya Sagar oswal. Father of jawahar lal Oswal. The companys present chairman and
managing director. The company is one of the pioneers of the organized Indian woollen hosiery
industry. The company made a beginning as a manufacturer of hosiery items. Which was
followed by setting up a worsted woollen spinning plant of 800 spindles in 1954 {today .4
million spindles} to serve as a backward integration of the then existing manufacturing activities.
The company believes that this worsted woollen spinning in the northern India.
Matching ahead in the journey pace with overall industrial development in India the company is
now a a vertically integrated woollen textile company, having presence in diverse market, with
wide range of products including wooollen hosiery and cotton garments. In companys woollen
hosiery segment, we start our operations with import of raw greasy wool mostly from Australia
and company products include various types of specialty yarns, such as, worsted woollen yarn,
acrylic yarn, various types of wool based blended yarn, fancy yarn, hand knitting and hosiery
garments etc. The company subsequently added cotton garments to company existing product
portfolio during fiscal 2002, which we outsource as per our requirements and sell under company
own brand name. Since march 2006, the company have started manufacture of indigo dyed
specialty denim fabric, which has added to our existing range of product portfolios.
The company manufacture facilities are spread across various locations in and around Ludhiana
in Punjab fully backed by the facilities for product, design studio and efficient sampling
infrastructure to provide quality products to our customers. Currently, The company over 4000
persons and company present manufacturing facilities include 26,248 spindles to manufacture
worsted woollen yarn besides machines, knitting, dyeing and finishing. Presently, the company
manufacturing facilities are producing approximately 2.5 million lbs of wool tops per annum,
7,50,000 pieces of readymade knitted garments per annum and 1 million meters of denim fabric
per annum.
Page 35 of 86

The company are registered owners of well-known trade name MONTE CARLO for selling
company woollen hosiery and cotton garments monte carlo has been recognized as
superbrand for woollen hosiery garments since fiscal 2003 by international society of
superbrands. The company distribution channel comprises of a mix monte carlo exclusive
brand outlets, network of national chain stores and multi brand outlets. The company products
in woollen hosiery segment are also sold under the brand name CANTERBURY , for premium
quality woollen hosiery garments and OWM for company specialty woollen yarn etc.
including the hand knitting yarn. The company also have landed properties admeasuring
approximately 5.01 acres in gurgaon and 12.70 acres in Chennai which have been leased have
been leased out and are contributing significantly to the overall revenue and profitability of the
our company. These properties are apart from the landed properties that we own in and around
ludhina in which company manufacturing facilities are based.
The company total income and restated profit after tax in fiscal 2006 were at Rs. 2532.85 million
and 148.48 million 148.48 million respectively. For the six months ended September 30, 2006,
the company restated total income and restated profit after tax were at Rs. 1427.93 million and
Rs. 101.57 million respectively.

Page 36 of 86

GROUP OF

COMPANIES

Gangotri Overseas panipat.

Nahar Spinning mills Ltd.
Nahar Exports Ltd.
Nahar international Ltd.
Gangotri Overseas panipatCotton Mills Ltd.
Nahar Industrial Enterprise Ltd.
Nahar Industrial Infrastructure Corp. Ltd.

Page 37 of 86

 Nahar Sugar & allied industrial Ltd.

Rishab Spinning Mills
Arham Spinning Mils

Page 38 of 86

GENERAL INFORMATION
Registrar office of GANGOTRI OVERSEAS PANIPAT.:GANGOTRI OVERSEAS PANIPATLIMITED
G.T. ROAD, SHERPUR,
LUDHIANA, 141003, PUNJAB {INDIA}
TEL: +91 161 2542501
FAX: +91 161 2542509
WEBSITE: www.owmnahar.com

Address of registrar of companies:Registrar Of Companies Punjab, Himachal Prdesh And Chanigarh

Kothi No.286,
Defense colony,
Jalandhar 144001,\
Punjab India.

Company secretary and compliance officer

Mr. Nitin Sharma
G.T. Road, Sherpur,
Ludhiana 141003 Punjab India.
Tel: +91 161 2542501-07
E-mail: owmipo@owmnahar.com

Page 39 of 86

MANAGEMENT
The following persons constitute the companys board of directors:a) Mr. Jawahar Lal Oswal, chairman and managing director;

b)
c)
d)
e)
f)
g)
h)
i)
j)

Mr. kamal oswal, director;

Mr. Dinesh Oswal, Director;
Mr. Sandeep Jain, executive director;
Mr. Dinesh Gogna, Executive director corporate finance and taxation;
Dr. O.P. Sahni, Independent additional director;
Mr. Amarjeet Singh, Independent director;
Dr. Ms. H. K. Bal, Independent additional director;
Mr. K.S. Maini, Independent additional director; and
Dr. Suresh Kumar Singla, Independent additional director.

FINANCE CONTROLLER OF GANGOTRI OVERSEAS PANIPAT.

MR. R.M.SOOD

Page 40 of 86

COMPANY BUSINESS PHILOSOPHY

The business, which started with a modest beginning 0f 800 spindles for worsted spinning to
become a large woollen textile player believes in the philosophy success is tradition and growth
is imperative. Since beginning company focus has been achieving economies in the scale of
production, rationalize cost, integration of operations thereby increase the revenue from year to
year.
The company view on costs has never refrained from rewarding the work force of company.
Until date we have enjoyed cordial with company work force at all levels, keeping in mind
company philosophy and to meet out any contingency company have always developed second
line of key managerial personnel. Company human resource development policy are designed to
motivate achieve goal and excellence in management. The company have always remained
conscious about prevalent fashion and design and quality translated into high level of consumers
satisfaction. Company has also kept fully abreast with latest trend prevailing in domestic as well
as international markets. The company philosophy is not only to earn profit but prosperity of
other stakeholders.

Company competitive strengths

Extensive experience of company promoters

Owners of well known and established brands of Monte Carlo and OWM
The landed property in Gurgaon and Chennai
Fully integrated woollen operations
Wide and various ranges of products
Quality standard

Page 41 of 86

OWM key strategies

Established Monte Carlo as on all seasons pan India brand

Further strengthening company retail presence
Increasing product range
Foraying into kids wear
Cost reduction
Enhancing manufacturing capacities

Page 42 of 86

(D) Company major events

Year

Event

1949

Company worsted was incorporated as public limited company with a woollon

hosiery knitwear unit, a worsted spinning plant, barrack blanket weaving and

1950

finishing plant at unit no. 1 at miller Gang, Ludhiana.

First worsted spinning plant at unit 1. G.T. Road, Miller Ganj, Ludhiana.

1960

Set up unit no. 3 at G.T. Road, Sherpur, Ludhiana for combing spinning dyeing,

1968
1969
1972

weaving and processing.

Commenced export of knitted hosiery.
Set up vanaspati manufacturing plant at unit no. 3, G.T. Road, Sherpur, Ludhiana.
Set up unit no. 5 at industrial area A, Ludhiana for manufacturing woollen hosiery

1973
1974-1985

knitwear.
Set up a new Vanaspati plant at Chennai, Tamilnadu.
Launched our MONTE CARLO brand.

Established an OWM export house

Received recognition as an export house under the EXIM policy

Recognized as one of the first five trading house under the EXIM policy
1981-82

Outbreak of fire at our office G.T. Road Miller Ganj, Ludhiana.

1993

Set up a unit no. 4 at G.T. Road Ludhiana, a lambs wool plant, to produce high

1995
1998
2002
2004

value, fine micron lambs wool yarn for top class knitwear.
Launched CANTERBURY brand.
Closed company vanaspati and vegetable oil unit at Chennai and Ludhiana.
Extended the application of MONTE CARLO brand to cotton segment.
Commenced operations for augmentations and up-gradation of spinning and

2005

knitting capacities started at unit no. 3.

Operationalised the co-generation and up-gradation of spinning and knitting

2006

capacities started at unit no. 3

The first phase of the denim plant at Lalru, Punjab was commited.

Started appointment franchises for retail outlets for marking our own
products as well as products imported from abroad/outsourced from
Page 43 of 86

manufacture of repute.

Page 44 of 86

(E) AWARDS
Nahar Group has been honored with prestigious National Export Award for outstanding
export performance and also, the Texprocil Trophy by the Textiles Export Promotion council
for outstanding export performance in yarn.
1995 to 1999 best exhibited product by the Woolmark Company for Monte Carlo woollen
hosiery garments.
Super brand recognition for Monte Carlo woollen garments by international society for
super brands.

Page 45 of 86

(F) PRODUCTS
Yarn Products

Nahar Group surges ahead to establish itself as a reputed Industrial Conglomerate with a wide
ranging portfolio of yarns that offers every thing. A desiring customer can look for :

100% Cotton Yarns

100% Cotton Dyed yarns

100% Polyester Yarn

Industrial Yarns

Open end yarns

Open end slub yarns

Blended yarns

100% Acrylic Yarns

.Industrial Yarns

Specialized Yarns

Page 46 of 86

Fabric Products

Blends:- 100% Cotton & Cotton Blends (Poly-cotton, Cotton-Stretch & Cotton-Tencil etc.)
Woven Vibrancy:- Twills, Dobbies, Broken Twills, Ripstop, Ottoman, Chinos, Satins, Tussors,
Bedford Cord, Cavallery Twill, Canvas, Gabardine..
Utility:- Garments (Tops, Bottom & Outerwear)
GSM :- 100 gms to 330 gms
Yarns Used:- Single & Double Count with different counts (7s and 60s) technologies such as
open end, Ringspun, Combed, Compact, Multicount & Slubs
Performance Fabrics

High Density constructions

AIRO Finish

Bio Polish

Nano Care

Soil Release

Microsanding

Anti Bacteria

Frost Free
Page 47 of 86

Wrinkle Free

Stain Guard

Page 48 of 86

Sugar products

NAHAR SUGAR represents the Groups concerted thrust towards exploring new need based
areas in tune with the larger context of customer needs and market demands.
Established in 1993 as Nahar Sugar & Allied Industries Limited (NSAIL) in the assisted sector
with PSIDC presently is a unit of Nahar Industrial Enterprises Limited (NIEL), as a result of
NSAILs merger with Nahar Industrial Enterprises Limited in 2005.

Installed capacity of 2,500 tons of cane crushed per day (TCD) at District Fatehgarh Sahib,
Punjab for producing all types and grades of sugar and allied products.

Cogeneration power plant of 8 MW.

Excess power generated by the sugar business is utilized in the companys other businesses.
Upcoming product of company
Corduroy

Page 49 of 86

EXPORT MARKETS

Usa, United Kingdom, Germany, Russia, Japan, Australia, New-Zealand, Holland, Thialand,
Hong-Kong, Singapore, Taiwan, South Korea, Malaysia, Mauritius, Dubai, Bahrain, South
Africa, Canada, Egypt, Israel, and Bangladesh.

Page 50 of 86

OBJECTIVES OF THE STUDY

&
RESEARCH METHODOLOGY

Page 51 of 86

OBJECTIVES OF STUDY
The chief objective of the current study is to analyses short term capital investment and
management of the present company;
1:- To know the working capital requirement of the company.
2:- To know liquidity position of the company.
3:- To find the future need of the working capital management in running organization.

Page 52 of 86

RESEARCH METHODOLOGY
RESEARCH
Research in common parlance refers to a search for knowledge. One can also define research as a
scientific and systematic search for pertinent information on a specific topic. Research is an
academic activity as such the term should be used in a technical sense. Research refers to:
Defining and redefining problem
Formulating hypothesis or suggested solutions
Collecting, organizing and evaluating data
Making deductions and reaching conclusions
At last carefully testing the conclusions to determine whether they fit the formulating
hypothesis.
RESEARCH PROCESS
Research process consists of series of action or steps necessary to effectively carry out research.
These steps are to be followed in the same sequence. These steps are as follows:
Specifying research objective
Preparing a list of needed information
Designing the data collection project
Select a sample size
Organizing and carrying data and reporting the findings.

Page 53 of 86

SOURCES OF DATA
The sources of data means from where we have to get data. There are mainly two sources of
data. These are:
PRIMARY DATA:
Depending upon the nature of the problem, primary data can be collected through various
methods. In this study, personal interviews with senior officials of different departments of
corporate office, with GANGOTRI OVERSEAS PANIPATLIMITED and various members of
finance and accounts department of the company.
SECONDARY DATA:
The secondary data are those data which have already been collected by someone else and which
have already been passed through statistics process. I get published data as maintained by
company like company manuals, annual reports balance sheets etc.
Data collected through websites also.
REPORT WRITING AND PRESENTATION
Report encompasses- charts, diagrams

Page 54 of 86

WORKING CAPITAL ANALYSIS

Page 55 of 86

WORKING CAPITAL ANALYSIS

As we know working capital is the life blood and the centre of a business. Adequate amount of
working capital is very much essential for the smooth running of the business. And the most
important part is the efficient management of working capital in right time. The liquidity position
of the firm is totally effected by the management of working capital. So, a study of changes in
the uses and sources of working capital is necessary to evaluate the efficiency with which the
working capital is employed in a business. This involves the need of working capital analysis.
The analysis of working capital can be conducted through a number of devices, such as:
1. Ratio analysis.
2. Fund flow analysis. 3. Budgeting.
1. RATIO ANALYSIS
A ratio is a simple arithmetical expression one number to another. The technique of ratio analysis
can be employed for measuring short-term liquidity or working capital position of a firm. The
following ratios can be calculated for these purposes:
1. Current ratio.
2. Quick ratio
3. Absolute liquid ratio
4. Inventory turnover.
5. Receivables turnover.
6. Payable turnover ratio.
7. Working capital turnover ratio
8. Working capital leverage
9. Ratio of current liabilities to tangible net worth.
2. FUND FLOW ANALYSIS
Fund flow analysis is a technical device designated to the study the source from which additional
funds were derived and the use to which these sources were put. The fund flow analysis consists
of:
a.
Preparing schedule of changes of working capital
b. Statement of sources and application of funds.
It is an effective management tool to study the changes in financial position (working capital)
business enterprise between beginning and ending of the financial dates.

Page 56 of 86

KEY WORKING CAPITAL RATIOS

The following, easily calculated, ratios are important measures of working capital utilization.

Ratio

Formulae

Result

Interpretation

Stock

Average Stock =

Turnover

(in days)

Cost of Goods

need to break this down into product

Sold

groups for effective stock management.

365/ days

x On average, you turn over the value of

your entire stock every x days. You may

Obsolete stock, slow moving lines will

extend overall stock turnover days. Faster
production, fewer product lines, just in
time ordering will reduce average days.

Receivable Debtors * 365/ =

s

Ratio Sales

days

(in days)

x It takes you on average x days to collect

monies due to you. If your official credit
terms are 45 day and it takes you 65
days.
One or more large or slow debts can drag
out the average days. Effective debtor
management will minimize the days.

Payables

Creditors

*=

Ratio

365/

(in days)

Cost of Sales

terms this will increase. If you pay earlier,

(or Purchases)

say, to get a discount this will decline. If

days

x On average, you pay your suppliers every

x days. If you negotiate better credit

you simply defer paying your suppliers

(without
Page 57 of 86

agreement)

this

will

also

increase - but your reputation, the quality

of service and any flexibility provided by
your suppliers may suffer.

Current

Total

Ratio

Assets/
Total

Current =

x Current Assets are assets that you can

times
Current

readily turn in to cash or will do so within

12 months in the course of business.

Liabilities

Current Liabilities are amount you are

due to pay within the coming 12 months.
For example, 1.5 times means that you
should be able to lay your hands on $1.50
for every $1.00 you owe. Less than 1
times e.g. 0.75 means that you could
have liquidity problems and be under
pressure to generate sufficient cash to
meet oncoming demands.

Quick

(Total

Ratio

Assets

Current =

x Similar to the Current Ratio but takes

- times

Inventory)/
Total

account of the fact that it may take time

to convert inventory into cash.

Current

Liabilities

Working

(Inventory

Capital

Receivables

Ratio

Payables)/

+ As

% A high percentage means that working

- Sales

capital needs are high relative to your

sales.

Sales

Page 58 of 86

Page 59 of 86

Statement showing change in working capital for Gangotri Overseas panipat:(Rs. in lacs)
Particulars
Current Assets
Inventories
Sund. Debtors
Cash & Bank
Loan & Advances
Total ( A )

07-08

08-09

Increase ( + )

Decrease (- )

12800.83
6186.63
2930.89
7201.48
29119.83

18715.45
7894.50
275.00
3775.00
30659.95

5914.62
1707.87
---

--2655.89
3426.48

8872.37
8872.37

10160.2
10160.2

--

1287.83

20247.46
252.29
20499.75

20499.75

7622.49

20499.75

7622.49

7370.20
252.29
7622.49

Current Liabilities
C.L.and provisions
Total ( B )
( A-B )
in working capital
Total

Page 60 of 86

Statement showing change in working capital for Gangotri Overseas

panipatwoollwn mills Ltd.:
( Rs.in lacks)
Particulars
Current Assets
Inventories
Sund. Debtors
Cash & Bank
Loan & Adv.
Total ( A )
Current Liabilities
C.L. & provisions
Total ( B )
( A-B )

in
capital
Total

08-09

09-10

Increase ( + )

Decrease ( - )

18715.45
7894.50
275.00
3775.00
30659.95

22094.36
9830.00
2740.00
3971.50
38635.86

10160.2
10160.2

11430.36
11430.36

20499.95

27205.50
88.93

7975.91

1270.36
6705.55

27205.50

27205.50

7975.91

7975.91

working

Page 61 of 86

3378.91
1935.50
2465.00
196.5
1270.36

CALCULATION OF WORKING CAPITAL FOR GANGOTRI OVERSEAS

PANIPAT.
(Rs.in lacks)
YEAR

31.03.08

31.03.09

31.03.10

CURRENT ASSETS
12800.83

18715.45

22094.36

SUNDRY DEBTORS

6186.63

7894.50

9830.00

CASH AND BANK

2930.89

275.00

2740.00

LOANS & ADVANCES

7201.48

3775.00

3971.50

29119.83

30659.95

38635.86

CURRENT LIABILITIES AND PROVISIONS

C.L. & PROVISIONS
8872.37
TOTAL C.L.
8872.37

10160.2
10160.2

11430.36
11430.36

INVENTORIES

TOTAL CURRENT ASSESTS

LESS:-

NET CURRENT ASSETS

20247.46

20499.75

27205.50

BANK BORROWINGS FOR

13821.40

12500.00

15000.00

6426.06

7999.75

12205.50

W.C.
NET WORKING CAPITAL

Page 62 of 86

ANALYSIS OF VARIOUS COMPONENTS OF WORKING CAPITAL

INVENTORY ANALYSIS
Inventory is total amount of goods and materials content in a store of factory at any given time.
Inventory means stock of three things:1. Raw materials
2. Semi finished goods.
3. Finished goods.

POSITION OF INVENTORY IN GANGOTRI OVERSEAS PANIPAT

(Rs.in lacks)
PARTICULAR
STORES
RAW MATERIAL
FINISHED
GOODS
W.I.P
TOTAL

2008

2009

2010

587.19
6473.42

482.00
9746.10

548.25
11705.50

3834.44

5554.20

6500.47

1905.78
12800.83

2947.15
18729.45

3340.14
22094.36

Page 63 of 86

Analysis through chart:

INVENTORY
14000
11705.5

12000
9746.1

10000
8000
STORES
AMOUNTS (IN LACKS)

6473.42
RAW MATERIAL
6000
4000

FINISHED GOODS
5554.2

6500.47
W.I.P

3834.44

3340.14

2947.15
1905.78

2000
587.19

548.25

482

0
2008

2009

2010

YEARS

INTERPRETATION:
As we analyze

the financial statements of the company we come to know that the sale of the

company increases so as we know that the sales increases due increase in the demand of the
product. So in order to meet the demand of the customers company has to increases its
production. And in order to increase the production company needs more raw materials. so we
can see that Raw material for the financial year 2008 was 6473.42 and it is increase to 9746.1
and then it is increased to 11705.5 for the year 2010. So, we can say that raw material is
increased by 3272.68 in 2009 and then 1956.4 for 2010. This is necessary for smooth production
so that there is no shortage of raw material, and also to avoid the un necessary delays in
production.
Page 64 of 86

SUNDRY DEBTORS ANALYSIS

Debtors or an account receivable is an important component of working capital and fall under
current assets. Debtors will arise only when credit sales are made
Position of Sundry Debtors in OSWAL
(Rs.in lacks)
PARTICULAR
Receivable
other

2008

2009

than

export and deferred

Export receivable
TOTAL

2010

5696.31

7457.00

8955.00

490.32
6186.63

437.50
7894.50

875.00
9830.00

Analysis through chart:

RECEIVABLE ANALYSIS
10000

8955

9000
7457

8000
7000
6000

5696.31

5000
AM OUNTS (IN LACKS)
Rec evinable other than export and deferred
4000

Export rec eivable

3000
2000
1000

490.32

437.5

875

0
2008

2009

2010

YEARS

INTERPRETATION
As we analyze the above table we come to know that debtors in 2009 it increases by 1707.87 and
in 2010 by 1935.5. So we can say that credit sales of company also increases because debtors
and bill receivables only arises when credit sales are made.

CASH AND BANK BALANCE ANALYSIS

Page 65 of 86

Cash is called the most liquid asset and vital current assets, it is an important component of
working capital.
Position of Cash and Bank Balance in OAWAL
(Rs.in lacks)
PARTICULAR
CASH
IN HAND &

2008
2930.89

WITH BANK
TOTAL

2009

2930.89

2010
275.00

2740.00

275.00

2740.00

Analysis through chart:

CASH & BANK BALANCE ANALYSIS
3500
3000

2930.89
2740

2500
2000
AM OUNT (IN LACKS)

1500
1000
500

275

0
2008

2009
YEARS

INTERPRETATION
Page 66 of 86

2010

From the above table we can see that Cash balance of the company is decreased to 275.00 from
2930.89 in financial year 2009 and in 2010 it is increased to 2740.00. So we can say that cash
balance of the company is very much fluctuating in 2009 and 2010. It means there is lack of
proper method and technique to maintain liquidity position of the company.

LOANS AND ADVANCES ANALYSIS

Loans and Advances here refers to any to amount given to different parties, company, employees
for a specific period of time and in return they will be liable to make timely repayment of that
amount in addition to interest on that loan.
Position of Other Loans & Advances in OSWAL
(Rs. in lacks)
PARTICULAR
2008
ADVANCE TO SUPPILERS
ADVANCE PAYMENT OF

1533.27
705.65

1450.00
------

1490.00
------

TAXES
PREPAID

&

2378.11

2250.00

2335.00

ADVANCES
DUTY DRAWBACK & CASH

82.18

75.00

146.50

INCENTIVES
INVESTMENT OTHER THAN

2502.27

-----

------

LONG TERM
TOTAL

7201.48

3775.00

3971.50

EXPENSES

2009

Page 67 of 86

2010

Analysis through chart:

LOANS & ADVANCES

3000
ADVANCE TO SUPPILERS
2500

ADVANCE PAYMENT OF TAXES

2502.27
2378.11
2335
2250

2000
1533.27
PREPAID EXPENSES &1500
ADVANCES
AMOUNT (IN LACKS)
1000

1490
1450
DUTY DRAWBACK & CASH INCENTIVES

705.65

500
INVESTMENT OTHER THAN LONG TERM82.18
0
2008

146.5

75
02009

02010

YEARS

INTERPRETATION
From above we can see that the advance payment supplier is decreased by 5.43% for the
financial year 2009 from 1533.27 of the previous 2008 and then it is increased by 2.75% in 2010
i.e. 1490 so we can say that advance payment to the supplier is increased in 2010.so we can say
that company want to take advantage of cash discount which is provided by the supplier for the
advance cash payment made by the Company and it also have positive impact on goodwill of
company and its the sign of satisfactory financial position of the company.

Page 68 of 86

CURRENT LIABILITIES ANALYSIS

Current liabilities are any liabilities that are incurred by the firm on a short term basis or current
liabilities that has to be paid by the firm with in one year.
Position of Other Current Liabilities in OSWAL
(Rs.in lacks)
PARTICULARS
i.
Creditors for purchases
ii.
Bills payable under L/C for raw

2008
2009
2716.71
3016.18

2010
3726.00
2475.80

4278.00
2900.00

iii.

material
Advance

from

225.14

300.00

357.00

iv.
v.
vi.

customers
Accrued expenses
Statutory liability
Installment of fixed asset loans

1271.96
257.86
1380.96

1402.50
290.00
1965.90

1475.00
332.00
2088.36

8872.37

10160.20

11430.36

received

due to within a year

TOTAL

Page 69 of 86

Analysis through chart:

CURRENT LIABILITIES & PROVISIONS

4500
Creditors for purchases

4000

4278
Bills payable under L/C for raw material
3726

3500

3016.18
3000 2716.71
2500
Advance received from customers
AMOUNT (IN LACKS) 2000
1500

2900
2475.8

Accrued expenses
1380.96
1271.96

2088.36

1965.9
1402.5

1475

1000
Statutory liability

500
0

357 332
300 290
257.86
225.14
Installment of fixed asset loans due to within a year
2008

2009

2010

YEARS

INTERPRETATION
If we analysis the whole current liability we can see that current liability is increased by 1287.83
and 1270.16 for the financial year 2008-09 and 2009-10 respectively. It is increasing by 13.5
respectively. If we see only creditors for purchase we got can say that in 2009 it is increased by
1009.29 in 2009 from 2716.71 for the financial year of 2009 and it is increased by 552 in 2010.
So we can say that the purchase of the company is increasing in all financial year annually
increased by 12% and we can also see that advances received from customers are also increasing
that is in 2009 it is increased by 74.86 from 225.14 and 57 in 2010. So we can say that more cash
is coming so we can say that liquidity position of the company becoming strong.

Page 70 of 86

WORKING CAPITAL RATIOS OF COMPANY

GROSS PROFIT RATIO OF Gangotri Overseas panipat.
Gross Profit Ratio
Gross Profit * 100
Sales
Gross Profit ratio: -

2008

2009

2010

18.11

17.99

18.82

ANALYSIS THROUGH CHART

GROSS PROFIT RATIO

19

18.82

18.8
18.6
18.4
18.2

18.11

18

17.99

17.8
17.6
17.4
2008

2009

2010

YEARS

Interpretation
Gross profit ratio of the company is 18.11% for the year 2008 and it is decreased to 17.99% in
2009. It is because the cost of the company has minor increase because of increase in raw
material cost. Then companys gross profit ratio increased to 18.82 which is best for company so
we can say that companys position is strong for the financial year 2010.

Page 71 of 86

NET PROFIT RATIO OF Gangotri Overseas panipat.

Net Profit Ratio
Net Profit
Sales

Net Profit ratio: -

* 100

2008

2009

2010

4.72

4.02

5.38

Analysis through chart:

NET PROFIT RATIO
6
5.38
5

4.72
4.02

0
2008

2009

2010

YEARS

Interpretation
Companys net profit is 4.72% in the year 2008 and then it is decreased to 4.02 in 2009. But in
2010 by covering minor decrease in previous year with, 70%. But from above data and by seeing
the overall earning we can say that company is in good position.

Page 72 of 86

POSITION OF RECEIVABLE RATIO IN OSWAL

FORMULA
DEBTORS
RECEIVABLE RATIO =

---------------- * 365
SALES

YEAR

31.03.2008

RECEIVABLE RATIO (IN DAYS)

31.03.2009

62

31.03.2010

65

70

Analysis through chart:

RECEIVEABLE RATIO (IN DAYS)

72
70

70
68
66

DAYS

65

64
62

62

60
58
2008

2009

2010

YEARS

INTERPRETATION
From the above table and diagram we can say that company has good debt collection period
because the company have low debt collection period. But the companies debt collection period
for the year 2008 is 62 and then it is increased to 65 in 2009 then 70 in 2010. So we can say that
the companys debt collection period is increasing averagely by 4 days per year. We can say that
the company has no impact on slow down of economy. So we can say that overall position of the
company is satisfactory.
Page 73 of 86

Page 74 of 86

POSITION OF PAYABLE RATIO IN OSWAL

FORMULA
PAYABLE RATIO=

CREDITORS
----------------------------PURCHASES

YEAR

31.03.08

PAYABLE RATIO (IN DAYS)

31.03.09

85

70

31.03.10
78

Analysis through chart:

Chart Title

DAYS

90
80
70
60
50
40
30
20
10
0

85

78
70

2008

2009

2010

YAER

INTERPRETATION
Gangotri Overseas panipat has good payable ratio like receivable ratio. The company has
averagely 77 days of payable ratio. So it is good for company because lower the payable ratio
means the company liquidity position is strong.

Page 75 of 86

POSITION OF CURRENT RATIO IN OSWAL

FORMULA
TOTAL CURRENT ASSETS
CURRENT RATIO=

-------------------------------------------TOTAL CURRENT LIABILITIES

YEAR

31.03.08

31.03.09

CURRENT RATIO

1.28

1.35

31.03.10
1.46

Analysis through chart:

Chart Title
1.5

1.46

1.45
1.4

1.35

1.35
1.3

1.28

1.25
1.2
1.15
2006

2009

2010

YAER

INTERPRETATION
The current ratio of the unit is less than standard. The current ratio should be 2:1 but it is not. But
the company have 1.28 in 2008 1.35 in 2009 and 2.46 in 2010. So we can say that the company
is in not in position as it need.

Page 76 of 86

POSITION OF QUICK RATIO IN OSWAL

FORMULA
QUICK RATIO=

TOTAL CURRENT ASSETS - INVENTORIES

----------------------------------------------------------------TOTAL CURRENT LIABILITIES

YEAR

31.03.08

31.03.09

31.03.10

QUICK RATIO

0.72

0.53

0.63

Analysis through chart:

Chart Title
0.8

0.72

0.7

0.63

0.6

0.53

0.5
0.4
0.3
0.2
0.1
0
2008

2009

2010

YEAR

INTERPRETATION

If we consider the data of the company we can say that this ration is also not matching with
standard that is 1:1. The company have quick ration .72 in 2008 than it is decreased to .53 in
2009 and then it increased to .63 in 2010.

Page 77 of 86

POSITION OF INVENTORY TURNOVER RATIO OSWAL

FORMULA
STOCK TURN OVER RATIO (IN DAYS) =

CLOSING STOCK
----------------------------------- * 365
COST OF GOODS SOLD

YEAR

31.03.08

31.03.09

31.03.10

STOCK TURNOVER RATIO

(IN DAYS)

127

154

156

Analysis through chart:

Chart Title
200
150
DAYS

154

156

2009

2010

127

100
50
0
2008

YEAR

INTERPRETATION
Inventory turnover ratio increasing of the company. Inventory turnover ratio is higher in the
2010. This is because effect of the raw material. The company is using its inventory in a good
manner.

Page 78 of 86

POSITION OF DEBT-EQUITY RATIO IN OSWAL

Formula = Debt / Equity
Calculation of debt-equity ratio at OWL:
Particulars
Long Term Debt
Net Worth
D/E Ratio

2007-08
18779.64
13290.28
1.41:1

2008-09
17511.01
15472.58
1.13:1

2009-10
16713.49
18911.22
0.88:1

Analysis through chart:

Chart Title
1.5
1
D/E Ratio

0.5
0
2009

2009

2010

YEAR

Interpretation
Gangotri Overseas panipat. has a decreasing trend in d/e ratio so we can say that it is using its
funds and not taking loans from banks. Equity is more than debt that shows a very strong
position in whole market. Using lower debts decreases the cost as well as risk. So company is in
good position.

Page 79 of 86

MAJOR FINDINGS
Statement Showing Difference from Previous Year OF OSWAL
(amt. in lacks)
Particulars

06-07

07-08

Investments

40.44

3.87

Inventories

by 2.94%
2032.18

by 0.29%
1317.70

Sundry Debtors

by 21.50%
762.68

by 11.48%
1278.06

Cash & Bank

by 18.40%
454.61

by 26.04%
2374.67

Current Liabilities

by 447.41%
4216.26

by426.93%
-2141.37

General reserve

by 60.50%
1402.72

by 19.14%
2127.56

by 25.03%

by 30.36%

Page 80 of 86

CONCLUSION

Page 81 of 86

CONCLUSION
By concluding the study about the working capital it is find that working capital management of
Gangotri Overseas panipat. Is too good. Gangotri Overseas panipat. Has sufficient funds to meet
its current obligation every time which is due to sufficient profits and efficient management of
Gangotri Overseas panipat.
Cash management and receivable management are too much good because of centralized control
on these. Raw material for the all units of Gangotri Overseas panipatgroup is purchased by
corporate office in bulk which Is the best way. Safety measures for inventories are also quiet
sufficient in company. Overall the working capital management of Gangotri Overseas panipat is
very much efficient.

Page 82 of 86

SUGGESTIONS

Page 83 of 86

SUGGESTIONS

Management should make the proper use of inventory control techniques like fixation of
minimum, maximum and ordering levels for all the items for less blockage of money.

The unit should also adopt proper inventory control like ABC analysis etc. This inventory
system can make the inventory management more result oriented The EOQ can be followed
in stores

Due to competition prices are market driven and for earning more margin company should
give the more concentration on cost reduction by improving its efficiency

The investments of surplus funds are made by the corporate office and the unit is not
generally involved while taking decisions with regard to structure of investment of surplus
funds. The corporate office should involve the units so as to better ascertain the future
requirements of funds and accordingly the investments are made in different securities.

The company is losing its overseas customers due to decrease in exports so the sufficient
amount of exports should the maintained.

Page 84 of 86

BIBLIOGRAPHY

Page 85 of 86

BIBLIOGRAPHY
References
1. Stephen Bush (2008) Seizing new treasures with aggressive cash management cash

flow magazine Paper No- 02-01.

2. Bebehuk L. and L. stole (2009) Organize Turn tax dollars into working capital Rush,
George pg- 02-01.
3. Allensius (2009) MANAGEMENT WORKING CAPITA Working Paper No- 02-01.
4. Gamble, Richard H. (2005) Working capital managers: muscling into a larger role
Cash flow Magazine 0196-6227

BOOKS
Financial management: Pandey IM, vikas publishing house.

ANNUAL REPORTS OF OWM

WEBSITES
http://www.owmnahar.in/
http://www.economywatch.com/business-and-economy/textile-industry-overview.html
http://www.economywatch.com/business-and-economy/textile-mills.html
http://www.allprojectreports.com/working_capital_analysis/working_capital_analysis.h
tm
http://www.faqs.org/abstracts/
journal.org/submissions/isfa2009_submission_13.doc+abstract+of+working+capital&cd

=24&hl=en&ct=clnk&gl=in

Page 86 of 86