national fertilisers limited

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N TION L

FERTILISERS

LIMITED



NFL, is a Mini Ratna Company was incorporated on 23rd August1974. It is the second largest producers of Nitrogenous Fertilizers inthe country with 16.6% share in Urea production during 2005-2006.

NFL operating plants are at Nangal, Bathinda, Panipat and Vjaipur. The Govt. of India, in 1984,

entrusted the Company to executethe country’s first inland gasbased fertilizer project of 7.26 lakh tonnes

Urea capacity in District Guna ofMadhya Pradesh & commercialproduction started from 01-07-1988.

NFL’s mission is to be the marketleader in fertilizers and a significantplayer in all its other business,

reputed for customer satisfaction,reasonable reward to shareholders,ethics, professionalism andconcern for ecology and thecommunity.

COMPANY PROFILE



INDUSTRY

These are the following products and services NFL delivers:PRODUCTS

Bio fertilizers Neem coated urea Indutrial products

Kisan urea Traded products

SPECIALIZED SERVICE Commissioning Activities of Plant &

Equipments Heavy Equipment Erection

supervision Laboratory Services Consultancy in Project Management



LANDMARK• NFL received the “Excellent” MoU

rating for the ninth time for the

year 2008-09. Vijaipur unitreceived “Green Tech Safety Award 2009” in fertilizer sectorfrom Green Tech Foundation, NewDelhi, for best safety practices.

• It also bagged the “Silver Awardfor outstanding achievement inEnvironment Management” by M/sGreen tech Foundation,

Hyderabad in the year 2010-11.• NFL received the “Excellent” MoU

rating for the ninth time for theyear 2008-09.



STATEMENT OF PROBLEM AND

OBJECTIVE

To understand the working capital managementand liquidity position of NFL.

To assess the impact of working capital onprofitability.

To determine the working capital leverage forexamining the sensitivity of ROE to changes in thelevel of gross working capital of the company.

The Major Objective of this study is to understand

the working capital management of NationalFertilizers Limited and to suggest necessarymeasures to overcome the shortfalls if any in theindustry.



METHODOLOGY Methodology may be a description of process, or may be

expanded to include a collection of theories, concepts or ideasas they relate to a particular discipline or field of inquiry.

This project requires a detailed understanding of the concept – Working Capital Management. Therefore, firstly we need to have

a clear idea of, what is working capital, how it is managed inNational Fertilizers Limited, what are the different ways in whichthe financing of working capital is done in the organization etc.

OPERATING

CYCLE



Working capital, also known as net working capital, is ameasurement of a business’s current assets, after subtractingits short-term liabilities. It is a valuation of the assets that abusiness or organization has available to manage and build

the business. Generally speaking, companies with higher amounts of

working capital are better positioned for success because theyhave the liquid assets that are essential to expand their

business operations when required. The need for working capital gross or current assets cannot

be over emphasized. As already observed, the objective offinancial decision making is to maximize the shareholderswealth.

ANALYSIS

Th f t f ki it l di ti i hi it f th fi d it l



The features of working capital distinguishing it from the fixed capital are asfollows:

Short term Needs: Working capital is used to acquire current assets whichget converted into cash in a short period.

Circular Movement: Working capital is constantly converted into cash whichagain turns into working capital.

Liquidity: Working capital is more liquid than fixed capital. It is due to thistrait of working capital that the companies with a larger amount of workingcapital feel more secure.

There are two concepts of working capital:Gross working capital

Net working capital(NET WORKING CAPITAL = CURRENT ASSETS – CURRENTLIABILITIES)



TURNOVER RATIO (Net sales / Inventory)

The Inventory turnover is a measure of the number of timesinventory is sold or used in a time period such as a year.

Turnover for the company has been increasing steadily for

the past ten years, with a growth of 81.23 percent since2001-02.

The marginal decrease/increase in sales turnover in thefollowing years is on the account of decrease/increase inprices of petroleum products.

This in turn results in decrease/increase in the amount ofsubsidy provided by the government, which in the end resultsin lower/higher turnover.

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

QUICK RATIO



QUICK RATIO [(Current Assets - Inventories) / CurrentLiabilities ]

An indicator of a company's short-term liquidity. Thequick ratio measures a company's ability to meet itsshort-term obligations with its most liquid assets. Thehigher the quick ratio/ ATR, the better the position of thecompany.

Looking at the chart we can see that for NFL, the quickratio/ATR is more than 1 with some exception in theearly 2000s.

This shows that the company is in a good position tohandle its current liabilities and has passed the acid test. Also as said earlier, NFL with its up-gradation plans, thisexcess liquidity will help it in the days to come.

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11

DEBT EQITY RATIO



DEBT EQITY RATIO (Debt/Equity)

It is a measure of the company's financial leveragecalculated by dividing its total liabilities by stockholders'equity. It indicates what proportion of equity and debt

the company is using to finance its assets. A high debt/equity ratio generally means that acompany has been aggressive in financing its growthwith debt. The debt equity ratio of NFL has beenreducing continuously over the years.

This is for the reason that NFL is trying to become adebt free company and has been striving for the same.But in the year 2011-12, this ratio is expected to gohigher as many expansion and modernization projectshave been carried out.

2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 2010-11



FINDINGS & CONCLUSION Working capital of the company was increasing and

showing positive working capital each year. It showsgood liquidity position. Positive working capital indicates that company has

the ability of payments of short terms liabilities. Working capital increased because of increment in the

cash and bank balance and reduction is sundrycreditors.

Current assets components shows sundry debtorswere the major part in current assets it shows that theefficient receivables collection management.



The profitability of the company has a positive relation withthe accounts receivable of the company. This shows that inthe Indian fertilizer industry in which most of the customers

are farmers, who are poor, will be happy to see themselvesget credit sales. This brings in more customers and highersales.

Liquidity of the company is seen to be stable and good. It

was also found that liquidity also has a positive impact onthe profitability of the company. The analysis shows us thatwith increase in the liquidity of the company the profitabilityalso gets a good lift.

RECOMMENDATIONS



RECOMMENDATIONS

Better credit policies and collection policies can help thecompany is reducing the average collection period and also

expand on the number of people who can go for creditpurchase . Company can use legal ways or through collectionagencies to keep a strict check on the defaulters.

NFL has a high inventory holding period, considering that theproduction is done with gas and coal. With the conversion of all

plants to gas based plant, the company should strive for aminimum inventory concept, as pipelines are used to providethese plants with gas continuously.

To face the present global challenges the human resourcesdepartment should be develop to improve various skills amongthe employees specially the motivational skills and having theregular training for the employees about various developmentsin the market.

NFL right now has only three zonal offices – Chandigarh,Lucknow and Bhopal. Company should try to expand its zonesto the south too, as they are also one of the most farmingintensive states.

national fertilisers limited

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