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Working Capital management

PROJECT REPORTDevelopment of Standard Model for Financial Management; Working Capital management Analysis in Emcure Pharmaceuticals Limited For the Partial Fulfillment of Degree of Master of Business Administration University (Pune)

By Sumit Jagadish Brahmankar M.B.A. [II Year] Under Supervision of Mr. Raju Kalera And Hrushikesh Khandekar Emcure Pharmaceuticals Limited, Emcure House, T 184, MIDC; Bhosari, Pune - 411026. Sinhgad Institute of Business Administration and Research 1

Working Capital management SINHAGAD INSTITUTE BUSINESS ADMINISTRATION AND RESEARCH OF MANAGEMENT, Kondhwa Bk, Pune

Sinhgad Institute of Business Administration and Research

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Working Capital management SINGAD INSTITUTE OF BUSINESS ADMINISTRATION & RESEARCH S.No. 40/4A+4B/1, Near PMC Octroi Post, Kondhwa Saswad Road, Kondhwa (Bk), Pune - 48

CERTIFICATEThis is to certify that Mr. SUMIT BRAHMANKAR student of SINHGAD INSTITUTE OF BUSINESS ADMINISTRATION & RESEARCH, Pune has completed his field work report at EMCURE PHARMACEUTICALS LIMITED, Pune on the topic of WORKING CAPITAL MANAGEMENT and has submitted the field work report in partial fulfillment of Management in Business Administration of the UNIVERSITY OF PUNE for the academic year 2007-2009. He has worked under our guidance and direction. The said report is based on bonafide information.

Prof. Shagufta Sunilkumar Project Guide Director

Prof.

Date: 4th Sep 2008 Place: Pune

Sinhgad Institute of Business Administration and Research

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Working Capital management SINHGAD INSTITUTE OF BUSINESS ADMINISTRATION AND RESEARCH, KONDHWA (BK)

DECLARATION

I herby declare that the project titled Working Capital Management is an original piece of research work carried out by me under the guidance and supervision of Prof. Shagufta. The information has been collected from genuine & authentic sources. The work has been submitted in partial fulfillment of the requirement of MBA (Finance) to Pune University.

Place: Pune

Date: 4th Sep2008

SUMIT BRAHMANKAR

Sinhgad Institute of Business Administration and Research

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Working Capital management

PREFACEIt gives me immense pleasure to present this report on Working Capital Management for EMCURE PHARMACEUTICALS Ltd. This research gives the idea about effective

management of working capital various methods of project evaluation, which can be used before setting a new industry.

This report is submitted as a part of course curriculum of SINHAGAD INSTITUTE OF BUSINESS ADMINISTRATION AND RESEARCH, PUNE.

The report is written in an easy and comprehensive manner using systematic methodology.

I have ensured my best to cover all the aspects related to this topic and make the report purposeful.

SUMIT JAGADISH BRAHMANKAR

Sinhgad Institute of Business Administration and Research

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Working Capital management

Sinhgad Institute of Business Administration and Research

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Working Capital management

CONTENTSSr no. Contents Pg no. 6 9 9 12 16 17 19 20 21 24 26 27 29 31 33 36 43 45 47 47 51

1 Introduction of management 2 Company's Overview Vision, Values & Mission 3 Financial Highlights 4 Business Area 5 Research Area 6 Working Capital Management 7 Working Capital 8 Working Capital Management 9 Working Capital Cycle 10 Bank Financing of Working Capital 11 Methods of lending 12 Balance Sheet 13 Working Capital limits of bank 14 CMA for bank finance 15 Comparative Ratios 16 Operating Cycle 17 Effect of Inflation 18 Analysis and conclusion 19 Letter of credit 20 Bibliography

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Working Capital management

INTRODUCTION OF MANAGEMENT;Evolution of Financial Management emerged as a distinct field of study at the turn of the century. Its evolution is divided into three broad phases The Traditional Phase, The Transitional Phase and The Modern Phase. THE TRADITIONAL PHASE lasted for about four decades. The focus of financial management was mainly on certain episodic events like formation, issuance of capital, major expansion, merger, reorganization and liquidation in the life cycle of the firm. The approach was mainly descriptive and institutional. Legal aspects, instruments, institutions and procedures formed the core of financial management. THE TRANSITIONAL PHASE began around the early forties and continued through the early fifties. Greater emphasis in this phase was put on day to day management problems faced by the financial managers in the area of fund analysis, planning and control. THE MODERN PHASE started in mid fifties and has witnessed an accelerated pace of development with the infusion of ideas from economic theory and application of quantitative methods of analysis. The scope of financial management was broadened. The central concern of Financial Management is considered to be rational matching of funds to their uses in the light of appropriate decision criteria. Since the beginning of the modern phase many significant and seminal developments have occurred in the fields of capital budgeting, capital structure theory, efficient market theory, option pricing theory, valuation models, dividend policy, working capital management, financial modeling and so on. Many more exciting developments are in the offing making a fascinating and challenging field. Management is an activity, which is concerned with planning, organizing, staffing, directing, reporting and budgeting, in order to achieve specific objectives. If we apply the concept to the Financial Management (F.M.) it is related to the above financial aspects of a company / firm with a very specific objective. Although (F.M.) is still a comparatively new discipline consequently there is still several contraparies about various theories and concepts, and has a greater importance today in the age of competition and IT based services.

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Working Capital management Therefore, it is essential to know the flow of funds / financial resources, for decision making pinpointed expeditions and exhaustively at proper time. It is basically concern with raising the funds (resources) and utilization of the same optimally, to maximize the returns of the owned company. Since raising of the funds / financial and the best utilization of the same, is very crucial part of the resources i.e. (Money, Manpower, Machine and Material) 4Ms for the organization goals to be achieved i.e. (Product, Price, Place, Promotion) 4Ps and leads to the success / failure of the organization. In this way a successful management planning, organizing, staffing, directing, reporting and budgeting has made Emcure achieve it objectives and goals. Financial Accounting: Financial accounting is that part of accounting which is mainly concerned with the historical, custodial and stewardship aspects of external reporting to shareholders, government and other users of accounting information outside the business entity. Financial accounting emphasizes the stewardship aspects of accounting rather than control or decision making aspects of accounting. It is the recording and processing of the financial data affecting the business unit, which relates to the past and generally for one year. The end product of Financial Accounting is the Profit and Loss Account for the period ended (which shows the Profit earned or Loss occurred) and the Balance Sheet as on the last day of the accounting period (which shows the financial position). The preparation of the financial accounting is based on generally accepted accounting principles enunciated by the accounting profession and is heavily constrained by legal regulation and accounting standards. Management Accounting: Management accounting is that part of accounting which is concerned, mainly with internal reporting to the managers of a business unit. It is related to planning, control and decision making which is useful for the management in discharge of its functions. Thus it emphasizes the control of decision making aspects of accounting, which is tailor made to suit the needs of the management of a specific enterprise, rather than stewardship aspects of accounting. Management accounting is a forward - looking and generally includes cost accounting and budgeting. The preparation of management is not based on generally accepted principals and is relatively free of constraints imposed by legal regulations and accounting standards.

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Working Capital management

Need and Scope of Study: Emcure as a multinational pharmaceuticals industry, in a short span of time and age of competition, globalization growth of business, occurrence of trade cycles, it is essential to expand the scope of financial system of long / short term financial management. This includes projection / rising of funds, utilization of fund optimally, to maximize returns of the shareholders. Objectives of Study: Financial accounting provides reliable information about changes in financial position resulting from the income producing efforts of an enterprise. Provides information about earning of an enterprise, presented in a manner that emphasizes sources and trends of earning. Information about economic resources and obligations of an enterprise. It also gives detail information about changes in net financial resources which results from the financial and investment activities of an enterprises. Any additional information, in the form of disclosures, which is relevant to statement user in assessing particular enterprises prospects. To maximize the profit with limited resources from unlimited challe