wc of bluestar

8/6/2019 wc of BLUESTAr

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COMPANY OVERVIEW

Blue Star is India's largest central air-conditioning company with an

annual turnover of Rs 2270 crores, a network of 24 offices, 5 modern

manufacturing facilities, 650 dealers and around 2500 employees. Blue

Star has business alliances with world renowned technology leaders such

as Rheem Mfg Co, USA; Hitachi, Japan; Eaton - Williams, UK; Thales e-

Security Ltd., UK; Jeol, Japan; ISA, Italy and many others, to offer

superior products and solutions to customers. The Company has

manufacturing facilities at Thane, Dadra, Bharuch, Himachal and Wada

which use state-of-the-art manufacturing equipment to ensure that the products have consistent quality and reliability. Blue Star fulfills the air -

conditioning needs of a large number of corporate and commercial

customers and has also established leadership in the field of commercial

refrigeration equipment ranging from water coolers to cold storages. Blue

Star's other businesses include marketing and maintenance of hi -tech

professional electronic and industrial products. Blue Star primarily

focuses on the corporate and commercial markets. These include

institutional, industrial and government organizations as well as

commercial establishments such as showrooms, restaurants, banks,

hospitals, theatres, shopping malls and boutiques.



VISION, MISSION, OBJECTIVES

y To deliver a world class customer experience.

y Focus on profitable company growth.

y Be a company that is a pleasure to do business with.

y Work in a boundary ± less manner between divisions to provide

best solutions to customers.

y Win our people¶s hearts and minds.

y Place the company¶s interest above one¶s own.

y Encourage innovation, creativity and experimentation in what we

do.

y Build an extended organisation of committed business partners.

y Be a good corporate citizen.

y Honour all personal and corporate commitments.

y Maintain personal integrity.

y Ensure high standards of corporate governance.



HISTORY AND GROWTH OF COMPANY

Blue Star was founded in 1943, by Mohan T Advani, an entrepreneur of

exemplary vision and drive. The Company began as a modest 3 -member

team engaged in reconditioning of air conditioners and refrigerators. An

expanding Blue Star then ventured into the manufacture of ice candy

machines and bottle coolers and also began the design and execution of

central air-conditioning projects. Then came the manufacture of water

coolers. In 1949, the proprietorship company set its sights on bigger

expansion, took on shareholders and became Blue Star Engineering

Company Private Limited. Ever since, there has been a constant and

profitable growth. Blue Star diversified and took up agencies for Material

Testing Machines and Business Machines. The export arena beckoned

and the Company began exporting water coolers to Dubai, where in fact,

'Blue Star' soon became the generic name for water coolers. The sixties

and the early seventies witnessed Blue Star continuing to expand and

thrive. A team of dedicated professionals aided Mohan T Advani in ever

furthering his vision of a profitable company dedicated to its ideals of professionalism and success. Employee strength crossed the 1000 mark

and the company went public in 1969 to become Blue Star Limited, as it

continues to be called today. Blue Star crossed the Rs. 500 crore

milestones in 2000 and the Rs. 600 crore milestones in 2002-03. With the

boom in construction activity and increased infrastructure investments,

the Company leveraged its leadership position to grow aggressively. In

the following three years, the Company nearly doubled its turnover,

clocking Rs 1178 crores in 2005-06. Even more than size, Blue Star

enjoys an enviable reputation as an ethical corporation, ever mindful of

its obligations towards customers, shareholders, dealers, business

partners, employees and the environment in which it operates.



MILESTONES

Year Event

1943 Mohan T Advani establishes Blue Star EngineeringCompany as a proprietary firm

1946 Blue Star secures Melchior Armstrong Dessau agency

1947 Worthington selects Blue Star as Indian Partner.Manufacturing of ice candy machines and bottle coolers

begins. Central air-conditioning system design andexecution begins

1948 Manufacture of water coolers commences

1949 Proprietorship converted to Private Limited Companies

1954 Blue Star selected as distributor for Honeywell

1955 GDR Testing machines distributorship begins

1957 Perkin-Elmer tie-up marks the start of the electronics business. GDR business machines agency commences

1960 Total Income crosses the Rs 1 crore mark

1964 Total employment crosses 1,000

1965 Techniglas Pvt Ltd set up to manufacture insulation

material

1969 Factory moves from Colaba in Mumbai to Thane

1970 Hewlett- Packard distributorship commences

1972First skyscrapers of Mumbai ± Air India Building, ExpressTowers and Oberoi Hotel set-up ± all air-conditioned by

Blue Star

1972Total Income crosses Rs 10 crores. Employment crosses

2,000

1974Water Cooler manufacturing license granted to Yusuf Alghanim, Kuwait

1977Middle East thrust begins. Joint Venture (JV) with Al

Shirawi in Dubai

1977 Hitachi Medical Equipment distributorship begins

1978 Industrial Division commences activity

1980 Bharuch Factory set up

1980-86 Major AC and R projects executed in the Middle East

1983 International Software Division inaugurated in Seepz

1984 York technology collaboration begins



1985Manufacture of centrifugal packaged chillers commences

at Thane Plant

1986 Total Income crosses Rs 100 crores

1987 Yokogawa Blue Star JV formed

1987 Gandhinagar factory set up for EPABX systems

1988

Blue Star becomes India¶s largest central air-conditioning

company

1988 Manufacturing collaboration with Mitsubishi

1988Assembly of personal computers under the brand nameµQuantum¶ begins

1989 JV with Hewlett-Packard and Motorola

1990 Gandhinagar factory closes

1992 Total Income crosses Rs 200 crores

1992 Blue Star exits from Motorola JV

1993 Formation of Arab Malaysian Blue Star JV in Malaysia

1995 Blue Star exits from HP India JV

1997 Dadra Plant inaugurated

1998 Major thrust on dealerisation and brand building begins

1999 Blue Star exits from Industrial Projects business

2000International Software business spun off to form Blue Star

InfoTech, listed on stock exchanges

2001Total Income crosses 500 crores. Export of air-

conditioning products begins

2003 Blue Star exits Yokogawa JV

2005Blue Star sets up new factory at Kala Amb in HimachalPradesh

2006 Total Income crosses the Rs 1000 crores mark

2006 Blue Star opts for a 5 for 1 stock split

2007 Blue Star sets up its fifth factory at Wada, Thane District

2008

Blue Star powers into Building Electrification. Acquires

Naseer Electricals, a leading Electrical Contractor 2008 Total income crosses Rs. 2000 Crores.



MANUFACTURING PROCESS

Blue Star understands that skilled manpower and other staff members are

an indispensable part of the manufacturing set-up and the management

should work shoulder to shoulder with them. Management grade staff too

is put through training programs on various aspects of manufacturing and business. Also, performance awards are announced every year. Apart

from enhancing the skills of the staff, such initiatives create a positive,

firm and lasting emotional bond between staff and company. Th is in turn

contributes to greater productivity.

MANUFACTURING SYSTEMS

The factories make extensive use of IT to enhance productivity and

product development capabilities. All our factories are ISO 9001: 2000

certified BAAN ERP implemented in 3 factories and Himachal under

implementation.

RAW MATERIAL AND MATERIAL MANAGEMENT

Sheet metal fabrication

A high degree of repetitive accuracy in sheet metal fabrication is

achieved by using specialized equipment, CNC metal forming machines.

The raw material used is prime quality, corrosion-resistant, galvanized

steel for enhanced life of the product. The equipment used for processing

the steel includes CNC machines such as an Amada turret punch press, a

LVD / Amada hydraulic press-break. All these allow for high quality

cabinet fabrication within tight tolerances



Power coating plant

The state-of-the-art powder coating plant covers a wide range of very

specialized process equipment, and is fully automated. A water -softening

unit treats the raw water before it is utilized in the automatic hot spray

pre-treatment system. It provides an even distribution of chemicals,controlled by an auto dosing mechanism that maintains the chemical bath

composition with the help of electronic sensors. After a final mineral

water rinse, the components pass through a dry-off oven under dust-free

conditions to remove all traces of moisture. The components are then

transferred into the powder painting booth for coating, where

temperature, humidity and dust levels are controlled. The powder

painting equipment, supplied by Nordson, USA, is equipped with

automatic electromechanical oscillators, for even powder deposition.

Desiccant dry air-with a dew point of minus 400

C - helps avoid

any moisture contamination of the powder. A 'smart spray' mechanism

senses the conveyor movement and component geometry to adjust

powder flow. Polyester powder - ideally suited for out door applications

- provides the maximum protection against UV deterioration andcorrosion. The components finally pass through a temperature-regulated

curing oven to achieve desired gloss and surface hardness.

Heat exchangers

Experienced engineers create heat exchanger designs using high precision

design software, which are then validated in our test labs. Blue Star also

makes sure that the designs are energy efficient for optimum heat

transfer.



Fin and Tube: The sophisticated coil shops have some of the most

advanced machines from USA, Japan and Korea. The Burr Oak coil line

produces energy efficient DX heat exchangers. These have plain or

enhanced split fins with grooved copper tubes for maximum heat transfer

efficiency. Then the source plain and inner grooved copper tubes with

coated aluminum fin stock of international quality from leading

manufacturers to fit our specifications.

Shell and Tube: Blue Star has shell and tube exchangers using specially

enhanced surface copper tubes and shell design as per Blue Star or

TEMA standards. Blue Star uses Heat Transfer Research Inc. (HTRI

design software for these heat exchangers).

Plate Type: Blue Star products also incorporate stainless steel plate heat

exchangers for specialized process applications.

System tubing

3-axis CNC copper tube-bending machines from Japan fabricate wrinkle-

free system tubing to exact dimensions for a perfect stress-free fit. Special

purpose machines carry out operations like end closing, flaring and

forming for good joint formation. Prime quality copper tubes sourced

globally help in optimum product performance.

Brazing

The brazing process is carried out in an inert atmosphere to avoid

oxidation and the resultant impurities from contaminating the refrigerant

system. Specially selected brazing equipment and fixtures are used to

produce high quality brazing. The joints are pressure -tested to check weld

strength and leakage. The coils are then tested for fine leaks with ultra -

sensitive electronic leak detectors. An automated coil brazing line from

Korea ensures consistent quality brazing and leak proof joints.



PUF installation

Blue Star fabricates CFC-free PUF insulated panels by using the latest

equipment from Cannon. This enables to achieve a uniform and constant

density of insulation for air handling units, telecom shelters and cold

storage panels. Blue Star supply panels of up to 6 meters in len gth and 25

mm to 125 mm in PUF thickness. PUF insulation expertise finds use in a

wide range of applications such as Air Handling Units, water coolers,

deep freezers, reach-in coolers and mortuary chambers.

Assembly and testing

The final product is assembled sequentially on conveyors, with in-built

quality checks during assembly operations. Pneumatic tools permit

torque-controlled rigidity, and specially coated corrosion-resistant

hardware provides firm locking. Each machine is then electronically

tested for leaks and run-tested for performance and electrical safety

parameters before packaging.



PRODUCTS

CENTRAL AIRCONDITION

The building blocks of Blue Star¶s solutions are its products. The most

comprehensive range of air-conditioning products in the country. A wide

range of models are available in each product category to ensure that the

air-conditioning system design is implemented without any compromise.

All products have been designed on the energy-efficiency platform, and

offer a host of advanced features.

Room air conditioners

By being an expert in the area of central air -conditioning, it also helps us

understand the cooling requirements of a diverse range of applications.

This expertise, knowledge and the skills have helped us to have some of

the most technologically advanced and energy efficient air -conditioning

solutions for small spaces.

Commercial Refrigeration

Having been the leaders in commercial refrigeration, we have a wide

range of products catering to various small and large scale indu stries



Cold storages

Blue Star¶s Cold Storage Division offers us a wide range of cooling and

preservation solutions. Solutions tailored made to suit any industry that

requires storage of perishable produce over extended periods of time

without suffering any loss of quality ± be it in look, feel, touch, taste or chemical composition. Industries that find Blue Star¶s cold storage

solutions enormously useful include the agriculture sector including

horticulture and floriculture units, manufacturers of fresh produce of any

kind, food processing units, pharmaceutical industries, seafood and other

similar industries, as well as the dairy and hospitality sectors, including

hotels, restaurants, and eateries.

Specialty Cooling Products

Blue Star has developed specialized products for process applications,

IT/ITES, telecom and the dairy industry. It has diverse experience and

have a deep understanding of the demands on air -conditioning and

refrigeration in each industry. This knowledge and domain expertise has

helped in designing and manufacturing a range of specialized products

which ensure that critical applications work seamlessly.

Research & Development

Blue Star offers complete engineered products and solutions with

differentiated features. With the extent of climatic conditions varying

across the nation, our products are designed to suit the specific local

conditions. Considering the shortfall of Electricity supply, all the products are designed for energy efficiency. Blue Star products are most

preferred in the domestic market because of energy efficiency features. In

the offer, they are widest range of products for varying applications. This



is possible due to extensive research and development that goes behind

the products.

All our factories are equipped with robust R&D facilities and a lot of

importance is given towards continuous up gradation. Currently R&D

team constitutes nearly 20% of the manufacturing division work force.This is a testimony to the significance that R&D has in the product

development process at Blue Star. R&D team is encouraged to update

with the latest techniques and processes in the field and thus are sent to

various exhibitions / site visits across the globe. Consultants from various

industries are also hired for specific industrial design projects.

Blue Star also believes in associating itself with leading global

organizations that have done path breaking work in the field of

innovations. The company also has tie-ups with reputed companies for

knowledge sharing and technical institutions like IIT, Mumbai, where

individual projects are executed. R&D at Blue Star also handles customer

specific requirements, which require tremendous amount of expertise in

that particular domain. Software that R&D team has deploye d and which

is used on a regular basis - Pro-Engineer, Solid Edge, AutoCAD, ProMechanics, R&R, HTRI, Mechanical Desktop, Rhino, Alias, CATIA,

IDEAS, Solid Works, Patran, Hypermesh, Femap, Ansys, Nastran,

Fluent, Flow Mechanica and Moldflow. Software packa ges including

those for system design, air handling unit selection and heat exchanger

optimization.



TECHNOLOGY ASSOCIATES

Blue Star has associated itself with global knowledge partners who have

been leaders in specific product manufacturing. Through this partnership,

Blue Star has been able to command a leadership position in the domestic

market. Blue Star initially tied-up with York in the mid 1980s. It has beenable to leverage this expertise and learning to manufacture its own

Chillers. We now manufacture our own range of Screw, Scroll and

Process Chillers. For Cold Rooms, Blue Star had tied-up with Kolpak,

USA and Heat Craft for Freezing Units. Rheem, USA not only provided

technical support for building the world class Dadra manufacturing unit,

but also shared technical expertise. The foray in precision equipment

business was achieved with support from Eaton Williams. Blue Star now

manufactures Precision Control Packaged Units for domestic and global

markets.



BUSINESS ASSOCIATES

In keeping with its win-win approach, Blue Star treats its vendors as not

just suppliers, but as business partners and tries to build long term

associations that are profitable both to the suppliers and to Blue Star. In

line with this thought, Blue Star has entered into long term arrangements

with its key suppliers, many of whom are world leaders. For instance,

Blue Star sources its Switchgears from Siemens, Compressors from

Danfoss of Netherlands and Refrigerant from DuPont. General Electric

Corp of USA provides Motors, while Hanbell of Taiwan supplies Screw

Compressors. Copeland of USA assists in System Design.

Over the years, Blue Star has built a strong network of suppliers around

it. Not only that, the company also helps in the development of its smaller

suppliers by providing various business related and technical inputs to

them. For instance, since the vendors are also manufacturers, they will

benefit from some of the good manufacturing practices that Blue Star

adopts. Blue Star has educated a number of small vendors on the

importance of ISO certification and encouraged them to get certified

within a certain time period. This approach has greatly boosted the

morale of vendors and firmly bonded them with Blue Star. Also, it

ensures that the suppliers walk side-by-side with Blue Star on the path to

growth.



MARKETING ACTIVITIES AND MANAGEMENT IN BLUE STAR



MARKETING ACTIVITIES AND MANAGEMENT IN BLUE

STAR

EXPORTS

Blue Star has been exporting its products to the Middle East for over two

decades. Blue Star products have stood the test of time in some of the

most difficult climatic conditions in the world such as UAE, Qatar,

Bahrain, Oman and Kuwait. On offer it has a comprehensive range of

products such as chillers with screw and hermetic scroll compressors, a

wide range of air handling and fan coil units, duct able packaged and duct

able split air conditioners including the heat pump versions. Blue Star

also offers unitary products such as window and split air conditioners,

deep freezers, cold rooms, water coolers and specialized air conditioners

for precision control applications, Variable Refrigerant Flow (VR F)

Systems with digital scroll technology and process chillers with

frequency modulation. These world -class products are manufactured at

our state-of-the-art manufacturing facilities in India. All the

manufacturing facilities are ISO 9001: 2000 certified, and are powered

through integrated Enterprise Resource Planning (ERP) software.

Moreover, most of the products go through stringent tests on reliability

and performance in our test labs.

SUPPLY CHAIN MANAGEMENT

Rapid growth coupled with volatility of input costs necessitated an agile



and adaptable supply chain. The Blue Star focused on both the efficiency

and responsiveness of all aspects of the supply chain by improving all

round execution capability. A combination of short term and long term

view along with the support of business associates helped the

Company tide over the uncertainty and turbulence of increasing input

costs. The supply chain adequately met the increased demands of the

market place supporting greater channel and project business success.

CHANNEL DEVELOPMENT

Blue Star has around 180 systems dealers who exclusively deal in the

Company's systems businesses consisting of packaged air conditioning

and cold rooms. These dealers are provided technical expertise,

installation and service competence of a high order. On the other hand,

room air conditioners and refrigeration products, which are simple to

install, are sold through a larger network of approximately 600 dealers.

Most of them deal exclusively with Blue Star products in the HVAC

domain. A few are multi-brand, multi-product dealers. The Company has

established a Channel Management Centre to oversee the policy

framework, certification and development of dealers and also put in place

a Training Department for training channel partners. During the year, the

Company implemented a number of initiatives in order to strengthen the

competence of the dealer channels and make them more robust. A

Management Development Program (MDP) for systems dealers was held

to impart the essentials of managing a business professionally. Systems

dealers were also put through a Sales Management training programme in

order to enhance their sales competence.



HUMAN RESOURCE MANAGEMENT IN BLUE STAR



HUMAN RESOURCE MANAGEMENT

Blue Star takes pride in the fact that the invaluable technical and business

knowledge it has acquired in 65 years as an organization in the field of air

conditioning and refrigeration is perhaps the richest in the country.

During the review period, with the substantial increase in businessvolume, the Company increased its total head count to 2565 (including

the absorbing of 124 employees from Nasser Electricals) as on March 31,

2008, an increase of 18% over the previous year, while Net Sales grew by

39%. Organizational productivity continued to grow in terms of sales per

person and value added per person. The focus on people development

continued at the same pace with special attention to developing the

technical skills of dealers and business associates. Training in soft skills

for Blue Star employees was enhanced with the introduction of some new

training programmes. In order to sustain the positive culture of the

Company, a new corporate programme was introduced called 'The Blue

Star Way'. This programme is intended to create an awareness of, and

strengthen the Blue Star Way of working.

A 360-degree feedback system continued to be used to

measure behavior of Senior Managers pertaining to the Corporate Values

and Beliefs. Environment, Health & Safety (EHS) has gained relevance

as a new management discipline in recent times. In order to improve its

performance in the EHS domain, the Company decided to provide a

corporate focus by creating a new department called 'Environment,

Health & Safety'. The EHS Department will be responsible for creating

standards and conducting workshops to sensitize all employees and

business partners on the EHS norms to be followed in the course of

business. The Welfare initiatives include providing life insurance cover to

all employees through HDFC Standard Life Insurance, annual medical

check-ups for employees above the age of 40 years, and the Company



subsidizing the medical insurance premium for dependent parents. The

Mohan T Advani Education Trust disbursed scholarships to employees'

children pursuing higher professional education while Blue Star Sahayata

Foundation extended financial assistance to a number of deserving cases

for mitigating emergency medical expenses. Harmonious and

constructive relations between the Management and workmen helped to

maintain a cordial work atmosphere and achieve business growth.

CORPORATE SOCIAL RESPONSIBILITY

Eco friendly initiative

Blue Star has made significant progress towards minimizing and even

eliminating the environmental hazards resulting from CFCs in certain

refrigerants used for cooling. As a matter of fact, Blue Star is one of the

few companies selected in India for funding by "The Multilateral Fund

for the implementation of the MONTREAL PROTOCOL". Blue Star has

already introduced 'ozone friendly' centrifugal chillers using HCFC -123,

the safe refrigerant replacing CFC-11. Blue Star also markets absorption

chillers which use water as refrigerant. All Blue Star reciprocating

chillers already use HCFC-22 refrigerant which is friendlier to the

environment than the older R-12. The Company actively promotes wider

use of large refrigeration systems using ammonia as the refrigerant. In

fact, Blue Star is a member of the International Institute of Ammonia

Refrigeration, USA.



Social initiative

Blue Star firmly believes that organizations must look beyond making profits and should contribute to the development and welfare of the

society. This attitude is most evident in the outreach initiatives organized

by Blue Star's factories. Blue Star factories take active participation in

providing temporary shelters and essentials for the victims of an

earthquake, sponsoring health check-ups and health education programs

in local schools. The families of operators are an integral part of social

development. Blue Star gives them appropriate advice on personal

matters, financial and investment matters. The family members are also

imparted training on diverse subjects. They are taught English as well.

Environmental initiative

Blue Star's factories have been exquisitely landscaped with lawns and

flowering plants dotting the campus. Trees have also been planted on a

proactive basis even outside the Blue Star factories. As a responsible

organization, special ETP plants are installed to dispose off the wastes

generated. Additionally, all our factories are designed for rain water

harvesting.



RISKS AND CONCERNS

RISKS

The Company has in place an effective Risk Management framework

under which all internal and external risks across the various businesses

and functions are periodically identified, assessed and acted upon by the

risk owners to minimize and mitigate their impact. These processes are

also periodically reviewed to ensure their effectiveness.

The Company continues to satisfactorily address the various financial

risks relating to interest rates, exchange rates and credit risks as well as

operating risks arising out of high input costs, changes in technology,

customer preferences, increasing size and complexity of contracts and

competitive pressures.

CONCERNS

While the strong fundamentals of the Company and it's sound financial

base have placed it in a strong position to face the vagaries of the market,

the overall uncertain economic scenario coupled with local and global

inflation and the high price of oil are causes for concern and consequently

a slow down in the economy could impact the growth of the Company to

some extent in the coming year. The Company will continue to remain

vigilant and will proactively take steps to mitigate the adverse impact, if

any, arising out of these concerns.



Employee development

The benefit of a mature business organization with 65 years of

operational excellence is that there are several good systems in place.

From a prospective employee point of view, Blue Star offers the

following advantages:

y There are well designed induction and technical orientation

programmes. There is a Corporate Technical Training Organization

which delivers a variety of technical training programmes for the

AC&R business. Engineers who join the Electronics Division get a

chance to go abroad for training with the Principals. The Corporate

HR runs a menu of non-technical soft skills training programmes

such as Business Communication Skills and Business Etiquette.

y The Blue Star Company has many well designed, time tested HR

practices such as setting the performance objectives at the

beginning of the year, reviewing employee performance every year

through an annual appraisal system and an annual compensation

review based on market surveys. In addition to a market aligned

salary structure, Blue Star also has a fairly attractive incentive

scheme wherein, the employee gets an incentive based on his

department¶s performance coupled with his own performance

rating.

y Typically, graduate engineers can look forward to entering real

managerial grades within 4 to 5 years. Once an employee enters the

managerial grade, he is exposed to a variety of management

education programmes including some programmes at IIM.

Ahmedabad.

y Last, but not the least, Blue Star rightly boasts of the Blue Star

Way, which is founded on a set of values and beliefs which have



evolved over time. These beliefs have made Blue Star a highly

respected, secular organization. The Company has an excellent

track record of employees working for many decades with the

Company. In today¶s high attrition market, the Company continues

to enjoy the privilege of retaining many of its employees for many

decades, thanks to its positive work culture.

y The company lays stress on continuously upgrading the skills of

operators, so that they keep increasing their productivity in the face

of changing manufacturing practices. Operators are put through

training programs, on passing which they are given certificates. In

the long term, these certificates also become a yardstick for

measuring employee performance. Learning through cross

functional activities is encouraged. In addition to that, staff

members and operators are encouraged to exercise yoga, play

sports and participate in community development initiatives. This

helps in the overall development of the individual and improves

performance. Kaizen and 5S are an integral part of all factory

operations.

Career at BLUE STAR

Since engineering and technical expertise are at the heart of the Blue Star

value proposition, engineers constitute the bulk of Blue Star¶s

recruitment. Consequently, engineers (graduate as well as diploma) can

find technically satisfying and well paying jobs in the following areas of

Blue Star

Air conditioning Projects Division:



Mechanical engineers are deployed in 3 different disciplines i.e. Sales,

Design & Engineering and Construction. Blue Star also entered the

commercial building electrical business since 2008. Consequently,

electrical engineers (graduate and diploma) can also find careers in the

Electrical Projects

Manufacturing:

Blue Star manufactures a wide range of air conditioning and refrigeration

equipment at its five factories. Here, careers can be made in R & D,

Production, Production Planning, Manufacturing Engineering, Quality

and Reliability and Procurement. Graduates as well as post graduates in

mechanical, electrical and electronics engineering can find rewarding

careers in Blue Star¶s manufacturing group.

Air-conditioning & Refrigeration Service Division:

Here again, engineers constitute the bulk of recruitment. Careers can be

made broadly in 3 disciplines viz. Service Marketing, Service Delivery

and Service Specialists¶ Group.

Channel Businesses:

Packaged air conditioners, room air conditioners, refrigeration products

and cold storages are mostly executed through licensed channel partners.

Consequently, engineers as well as MBAs with an aptitude for marketing

can develop satisfying careers in any of the channel businesses.

Management Services:

Like in all large corporate, the Company has well structured management

service departments such as Procurement & Logistics, Finance and

Accounts and Human Resources. Blue Star looks for talented

professionals with appropriate qualifications for these departments.



Work with BLUE STAR

An industry that¶s over Rs. 12,000 crores can be the opportunity to meet

your ambitious career goals. The cooling industry is thriving in a rapidly

developing industrial landscape wherein almost every major corporate

and commercial segment needs to cool down with efficient coolingsystems. No wonder the company is slated to grow at a rate of more than

30% in the next few years. And this is the point where the cooling

company really becomes hot.

To propel career in this arena, one definitely need an organization that

has what it takes to command a leadership position in the industry. Blue

Star is the India¶s largest central air-conditioning and commercial

refrigeration company with over six decades of experience in providing

expert cooling solutions. It has been associated with the most prestigious

installations and projects in the country and enjoys a preferred partner

status in most of the high growth segments. The Company has tripled its

turnover over the last three years and continues to be on a strong growth

trajectory.



WORKING CAPITAL

The term working capital refers to the capital required for day to day

operations of a business enterprise. It is represented by excess of current

assets, over Current liabilities. It is necessary for any organization to run

successfully its affairs, to provide for adequate working capital.

ADVANTAGES OF ADEQUATE WORKING CAPITAL

Working capital is the lifeblood and nerve center of business.

Just as circulation of blood is essential in the human body for

maintaining life, working capital is very essential to maintain the

smooth running of a business. No business can run successfully

without an adequate amount of working capital. The main

advantages of maintaining adequate amount of working capital are

as follows:

1. Solvency of the business: Adequate working capital helps in

maintaining solvency of the business by providing uninterrupted

flow of production.



2. Goodwill: sufficient working capital enables a business concern

to make prompt payments and hence helps in creating and

maintaining goodwill.

3. Easy loans: a concern hacking adequate working capital, high

solvency and good credit standing can arrange loans from ban ks

and others on easy and favorable terms.

4. Cash Discounts: Adequate working capital also enables a concern to

avail cash discounts on the purchases and hence it reduces costs.

5. Regular payments: Regular payments of salaries, wages and other

day-to-day commitments company which has sample working capital

can make regular payment of salaries. Wages and other day -to-day

commitments which raises the morale of its employees, increase their

efficiency reduces wastage¶s and costs and enhances production and

profits.

6. Regular supply of raw materials: Sufficient working capital ensures

regular supply of raw materials and continues production.

7. Ability to face Crisis: Adequate working capital enables a concern to

face business crisis in emergencies such as depression because during

such periods. Generally, there is much pressure on working capital.

8. Quick and Regular return on Investments: Every investor wants a

quick and regular return on investments. Sufficient of working capital



enables a concern to pay quick and regular dividends to its investors,

as their may not be much pressure to plough back profits. This gains

the confidence of its investors and creates a favorable market to raise

additional funds in the future.

9. High morale: Adequacy of working capital creates an environment of

security, confidence and high morale creates over all efficiency in a

business.

DISADVANTAGES OF EXCESSIVE WORKING CAPITAL

Every business concern should have adequate working capital to

run its business operations. It should have neither redundant or excessive

working capital nor inadequate nor shortage of working capital. Both

excessive as well as short working capital positions are bad for any

business.

1. Excessive working capital means idle funds which earn no profits for

the

Business and hence the business cannot earn a proper rate of return on

its Investments.

2. When there is redundant working capital, it may lead to unnecessary



Purchasing and accumulation of inventories causing more chances of

Theft, waste and losses.

3. Excessive working capital implies excessive debtors and defective

credit Policy, which may cause higher incidence of bad debts.

It may result into overall inefficiency in the organization.

When there is an excessive working capita l relation with the banks

and other financial institutions may not be maintained.

Due to low rate of return on investments the value of shares may

also fall.



Movements of the business cycle bring about shifts in working

capital position. The upward swing is associated with spurt in sales

and increase in levels of inventories and book debts. There could be a

cash shortage and borrowing may become necessary. On the other

hand, when there is a downswing, the level of inventories and book

debts may fall, but revenues also fall, while certain categories of costs

remain fixed and cash shortage right still be felt.

3. Nature of Business:

The nature of business has an important bearing on its working

capital needs, some ventures like retail stores, construction companies

etc. require an abundance of working capital. In other cases such as

power generations and supply, the current assets playa minor and

secondary role.

1. The manufacturing CycleS

A longer manufacturing cycle between the raw material purchase

and the completion of the manufacturing process will obviously mean

larger tie up of funds to meet increased working capital needs. In such

cases management should try to increase the rate of production and

reduce the cycle time and thus cut down working capital requirement.

This can be achieved through process changes or through effective

organization and coordination at all levels of enterprise activity.

Frequent changes in setups, waiting for materials, tools or instructions

and accumulations of working progress result inn extending the time

cycle and blocking more funds. Organised negotiations with suppliers

for attractive credit terms and retention of their continued confidence



by the settlement of bills on agreed dated can also help reduce

working capital requirements.

1. Credit Terms to Customers:

The credit terms to customers influence the working capital level

by determining the level of investment in book debts. Management

has to decide on suitable credit policy relevant to each customer based

on the merits of his case.

Unduly liable credit policies and permissive attitude in the matter

of collections of outstanding can lock up funds that would be other

wise be available for operating needs.

2. Vagaries in supply of Raw Materials

The sources of certain raw materials are few and irregular and pore

problems in the matter of procurement and holding, using up more

funds. Materials that are available only in certain seasons have to be

obtained and stored in advance. The working capital requirements in

such instances will show seasonal fluctuations.

3. Shifts in Demand for Products:

Some manufactured products are subject to seasonal fluctuations in

sales. In order to utilize the capacity to the maximum possible extent,

steady production may have to be maintained, through the demand for

finished products may very from time to time. Finished goods



inventories will therefore accumulate during off season, requiring

increased amounts of working capital to support higher levels of

inventory. Financial planning will have to provide for these funds,

requirements associated with steady, product ion and seasonal sales.

4. Production Polices:

To tackle the problem of having to find funds to support the

increasing finished goods inventory levels until they are sold during

the peak seasons, some companies diversify and produce other

products that are in demand, enabling manufacture of the main

product to follow the seasonal pattern of its demand.

5. Competitive Conditions:

In a competitive market, winnings and maintaining customers

goodwill will involve additional costs and present a variety of wo rking

capital problems. To offer the customer the benefit of choice, a variety

of products will have to be manufactured and stocked. This would

mean higher levels of inventories in all stages and, therefore,

additional working capital funds. More generous credit terms may

have to be extended and the investments in accounts receivables may

have to be higher, requiring additional funds. The degree of

completion is thus an important factor influencing working capital

requirements.



6. Growth and Expansion Programs:

As business grows, additional working capital has to be found. In

fact, the need for increased working capital does not follow the

growth in business activity, but preceded it. Advance planning of

working capital is thus a continuing necessity f or example Owing

concern. Or else, the company may have substantial earnings but little

cash. With fast growth, they may be under constant pressure for

raising external funds in addition to the internal generation. Forward

planning and continuous review, therefore, are very essential for such

companies.

7. Profit Levels:

By the very nature of things, some enterprises generate high

margins compared to others. The product category and the firm¶s

position in the market may have given this advantages. Other s have to

struggle in a highly competitive environment. But, profits cannot be

considered as available cash at the end of the period. Even as the

companies operations are in progress, cash is used up for augmenting

stocks, book debts and fixed assets. Elaborate planning and

projections of expected activities and cash flows, at short intervals,

assume importance. To meet anticipated deficits, sources of funds



will have to be identified and where surpluses are expected, suitable

applications will have to be planned.

8. Taxation:

Tax liability is an inescapable element in working capital planning.

It is a short term liability payable in cash. Advance taxes may have to

be remitted in installment¶s, on the basis of estimated profits. Periods

of high taxation impose additional strain on working capital. To able

to get the best out of the available tax incentives, the finance manager

has to draw up the operating plans of the company in advance and

utilize the resources for research and development, exports or other

purposes which promise tax benefits and promote the companies

earnings.

9. Dividend Policy:

Management has to preserve cash resources but at the same time,

it can not fail to satisfy investor expectations. Market prestige for the

shares of the company has also lobe nurtured and maintained in its

long run interests. During periods of low profits, maintenances of

steady dividends will involve draining of resources but may be

needed to preserve the companies image.

10. Reserves Policy:

One of the cherished goal of enterprise management is to build

up adequate reserves out of profits the urge to retain profits may act

as a major constraint on the dividend policy. The funds position being

given higher priority over dividend policy.

11. Depreciation Policy:



Depreciation policy determines the amount to be provided as,

depreciation on the various categories of Fixed Assets. The

depreciation charges do not in any cash outflow. Enhanced rated of

depreciation have the effect of reducing profits correspondingly,

which in turn can help in holding back of dividends. This process

conserves cash depreciation policies.

12. Price level changes:

Rapidly raising prices creates the need for more funds for

maintaining the present volume of activity for same levels of

inventories, higher cash outlays are needed. In an inflationary set up,

even operating expenses will grow for given levels of activity. Some

companies may be able to compensate part of these cost increases

through increases in prices for their products. The implications of

changing price levels on working capital position will vary from

company to company depending on the nature of the company.

13. Operating Efficiency:

This is a close relationship between the operating efficiency of a

company and its working capital position. Waste elimination,

improved coordination 19 cut delays higher efficiency in operations

and full utilization of resources are among the initiatives taken to

prevent erosion of profits. They also have the effect of getting more



out of given volume of working capital or obtaining the current levels

of out puts with a reduced volume of working capital. Efficiency of

operation accelerates the place of the cash cycle, and improves the

working capital turnover.

WORKING CAPITAL MANAGEMENT



Working capital management involves the relationship between a

firms short term assets and its short term liabilities. The goal of working

capital management is to ensure that a firm is able to continue its

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

term debt and upcoming operational expenses. The management of

working capital involves managing inventories, accounts receivable and

payable and cash.

Why firms hold cash:

The finance profession recognizes the three primary reasons

offered by economist JOHN Maynard Keynes to explain why firms hold

cash. The three reasons are for the purpose of speculation, for the purpose

of precaution, and for making transactions. All three of these reasons

from the need for companies to process liquidity.

CONCEPTS OF WORKING CAPITAL

There are two concepts of working capital:

(i) Gross Working Capital

(ii) Net Working Capital



In the broad sense, the term working capital refers to the gross

working capital and represents the amount of funds invested in current

assets. Current assets are those assets, which in the ordinary course of

business can be converted into cash within a short period of normally one

accounting year.

In a narrow sense, the term working capital refers to the net

working capital. Net working capital is the excess of current assets over

current liabilities.

Working Capital = Current Assets ± Current Liabilities

Net working capital may be positive or negative. When the current

assets exceed the current liabilities, the working capital is positive and the

negative working capital results when the current liabilities are more than

the current assets.

The Gross working capital concept in financial or going concern

concept whereas net working capital is an accounting concept of working

capital. These two concepts of working capital are not exclusive; rather

both have their own merits.

Gross concept is very suitable to the company form of organizationwhere there is divorce between ownership, management and control. The

net concept of working capital may be suitable only for proprietary form

of organizations such as sole-trader or partnership firms. However, it may



be made clear that as per the general practice net working capital is

referred to simply as working capital.

TYPES OF WORKING CAPITAL

There are varying concepts or perceptions of working capital,

which have relevance to specific situations.

WORKING

CAPITAL

ON THE BASIS OF

CONCEPT

GROSS WORKING

CAPIAL

NET WORKING

CAPITAL

ON T

E BASIS OFTI

¡

E

PER ¡

ANENT OR FIXED WORKING

CAPITAL

REGULAR WORKING

CAPITAL

R ESERVEWORKINGCAPITAL

TEMPOR ARY OR VARIABLE

SEASONALWORKINGCAPITAL

SPECIALWORKINGCAPITAL



1. GROSS WORKING CAPITAL:

Gross working capital represents by the sum total of all current

assets of the enterprise. Enough funds will have to be provided to sustain

the movement of raw materials through the work.

But short term financing is more risky than long term financing. In

process to the finished goods stage and then to accounts receivables and

up to the realization of cash. In other words, the funds needed would total

up to the constituent components, namel y stock of raw materials and

minimal cash and bank balances, constituting working capital. In

managing gross working capital, the shifts in investment in current assets

are under constant review, close attention and prompt correction.

Excessive investment in current assets is to be carefully avoided, as

otherwise profits would be adversely affected.



2. NET WORKING CAPITAL:

Net working capital is the difference between the current assets and

current liabilities. While current assets are short term assets that are

expected to get converted into cash with in one year, current liabilities areshort-term liabilities that are expect to fall due or mature for payment in a

short period, generally within a year, and represent short term sources of

funds. The concept of net working capital, as the excess of current assets

over current liabilities, highlights the character of he Sources from which

the funds have been obtained to support that portion of current assets in

excess of current liabilities. This part of working capital may be provided

by way of share capital, from internal sources such as reserves or plough

back of profits or from external sources in the form of long term

borrowings. There are two implications. The management has to examine

what proportion of the current assets has to be financed by permanent

capital and long term borrowings. Then there is the eagerness of short

± term creditors to verify whether the total current assets,

representing ultimate source of funds for the recovery of their dues,

maintains a convincing level above the total current liabilities or

obligations. A judicious



policy of mixing long term and permanent as distinct from short

term sources should be formulate to finance investment in current assets.

3. PERMANENT WORKING CAPITAL:

Permanent or fixed working capital is the minimum amount, which

is required to ensure effective utilization of fixed facilities and for

maintaining the circulation of current assets. There is always a minimum.

Level of current assets, which are continuously required by the

enterprise to carry out its normal business operations. For example. Every

firm has to maintain a minimum level of raw materials, work -in-progress,

finished goods and cash balance. This minimum level of current assets is

called fixed working capital.

TEMPORARY WORKING CAPITAL:

Any amount over and above the permanent level of wo rking capital

is temporary, fluctuating or variable working capital. This portion of the

required working capital is needed to meet fluctuations in demo

consequent upon changes in production and sales because of seasonal

changes.



WORKING CAPITAL CYCLE

Cash flows in a cycle into, around and out of a business. It is the

business¶s lifeblood and every manager¶s primary task is to help keep it

flowing and to use the cash flow to generate profits. If a business is

operating profitably, then it should , in theory, generate cash surpluses. If

it doesn¶t generate surpluses, the business will eventually run out or cash

and expire.

The faster a business expands the more cash it will need for

working capital and investment. The cheapest and best sources of cash

exist as working capital right within business. Good management of working capital will generate cash will help improve profits and reduce

risks. Bear in mind that the cost of providing credit to customers and

holding stocks can represent a substantia l proportion of a firm¶s total

profits.

There are two elements in the business cycle that absorb cash ±

Inventory (stocks and work-in-progress) and Receivables (debtors

owing you money). The main sources of cash are payables (your

creditors) and Equity and Loans.



If you« Then«..

y Collect receivables

(debtors) faster

y Collect receivables

(debtors) shower

y Get better credit (in terms

of duration or amount)

from suppliers

y Shift inventory (stocks)

faster

y Move inventory (stocks)

slower

y You release cash from

the cycle

y Your receivables soak up

cash

y You increase your cash

resources

y You free up cash

y You consume more cash

It can be tempting to pay cash, if available, for fixed assets e.g.

computers, Plant, vehicles etc. if you do pay cash, remember that this is

now longer available for working capital. Therefore, if cash is tight,

consider other ways of financing capital investment ± loans, equity,

leasing etc. Similarly, if you pay dividends or increase drawings, these



are cash outflows and, like water flowing down a plughole, they remove

liquidity from the business.

More business fail for lack of cash than for want of profit.

The third area in the account receivable management is collection

policies. These policies cover two aspects.

y Degree of effect to collect overdue

y Type of collection effects.

The collection policy should aim at accelerating collections from slow

payees and reducing bad debt.



CHAPTER IV

DATA ANALYSIS AND INTREPRETATION



STATEMENT SHOWING THE CHANGES IN WORKING

CAPITAL

(In Rupees 000)

PARTICULARS 2005 2006 INCREASE

Rs

DECREASE

Rs.

CHANGE

IN %

Current Assets

Advance 1,25,753

1,34,977

9,224 73.3

Stock 35,902

54,276

18,374 51.17

Receivables 18,830

28,730

9,900 52.57

Cash 414

563

149 35.99

Debtors 1,28,464

1,10,603

17861 13.90

Bank 2,732

5,346

2614 95.68

Total(a) 3,12,095

3,34,495

Current

Liabilities

Borrowing 20,000 37,464 17464 87.32



Payables 12,388 12,545 157 1.26

Surplus 10,155 9,813 342 3.36

Dividends 2,544 2,731 187 7.35

Total(b) 45,087 62,553

Networking

capital

2,67,088 2,71,942

Increase in

working capital

4,934

Total: 2,71,942 2,71,942 40,603 40,603

INTERPRETATIONS:-

1. By observing the above table we can notice that the Gross

Working capital has increased during the year 2005-2006.

2. From the above table there has been increase in Current

Assets from Rs. 3,12,095 in the year 2005 to Rs. 3,34,495 in

year 2006 showing an overall increase. And Current

Liabilities increased from 45,087 in year 2005 to Rs. 62,553

in year 2006 showing an overall increase. Understudy of

above table working capital overall increase 4,934 in 2005-

2006.

3. There it is to be noticed that greater the net Working Capital

higher liquidity, there is found 1year of Blue star




CAPITAL

(In Rupees

000)


Rs

DECREASE

Rs.

CHANGE

IN %

Current Assets

Advance 1,34,977 1,46,047 11,070 8.20

Stock 54,276 57,676 3,400 6,026

Receivables 28,730 52,759 24,029 83.63

Cash 563 1,382 819 145.47

Debtors 1,10,603 1,30,622 20,019 21.71

Bank 5,346 5,961 615 11.50

Total(a) 3,34,495 3,94,447

Current

Liabilities

Borrowing 37,464 53,858 16,394 43.75

Payables 12,545 12,658 513 1.36

Surplus 9,813 10,555 742 7.56

Dividends 2,731 2,924 193 7.03

Total(b) 62,553 79,995



Networking

capital2,71,942 3,14,452

Increase

inworking

capital

42,110 42,110

Total: 3,14,452 3,14,452 59,952 59,952

INTERPRETATIONS:-

1. By observing the above table we can notice that the Gross Working

capital has increased during the year 2006-2007

2. From the above table there has been increase in Current Assets

from Rs. 3,34,495 in the year 2006 to Rs. 3,94,447 in year 2007

showing an overall increase. And Current Liabilities increased

from 45,087 in year 2006 to Rs. 62,553 in year 2007 to Rs. 79,995

in the year 2007 showing an overall increase. Understudy of above

table working capital overall increase 42,111 in 2008-2007.

3. There it is to be noticed that greater the net Working Capital higher

liquidity, there is found 1year of Blue star




CAPITAL

(In Rupees

000)

PARTICULARS 2007 2008INCREASE

Rs

DECREASE

Rs.

CHANGE

IN %

Current Assets

Advance 1,46,047

1,68,135

22,088 15.12

Stock 57,676

81,341

23,665 41.03

Receivables 52,759

77,171

24,412 46.27

Cash 1,382

448

934 67.58

Debtors 1,30,622

2,09,649

79,027 60.50

Bank 5,961

4,630

1,331 22.33

Total(a) 3,94,447

5,41,374

Current

Liabilities

Borrowing 53,858 1,06,836 198.36



1,60,694

Payables 12,658 21,544 8,886 70.20

Surplus 10,555

10,973

418 3.96

Dividends 2,924 3,329 405 13.89

Total(b) 79,995

1,96,540

Networking

capital

3,14,452 3,44,834

Increase in

working capital

30,382 30,382

Total: 3,44,834 3,44,834 1,49,192 1,49,192

INTERPRETATIONS:






Liabilities increased from 79,995 in year 2007 to Rs.

1,96,540 in year 2008 showing an overall increase.

Understudy of above table working capital overall increase

30,381 in 2007-2008.






CAPITAL

(In Rupees

000)


Rs

DECREASE

Rs.

CHANGE

IN %

Current Assets

Advance 1,68,135 2,09,200 41,065 15.12

Stock 81,341

1,36,935

55,594 41.03

Receivables 77,171

54,219

22,952 46.27

Cash 448

1,210

762 67.58

Debtors 2,09,649

3,20,344

1,10,695 60.50

Bank 4630

11,919

7288 157.41

Total(a) 5,41,374

7,33,826

Current

Liabilities

Borrowing 1,60,694 2,08,818 48,124 198.36



Payables 21,544 21,053 491 70.20

Surplus 10,973

10,431

542 3.96

Dividends 3,329 3,571 242 7.27

Total(b)

1,96,540 2,43,873

Networking

capital

3,44,834 4,89,953

Increase in

working capital

1,45,119 1,45,119

Total: 4,89,953 4,89,953 2,16,437 2,16,437

INTERPRETATIONS:






Liabilities increased from 1,96,540 in year 2008 to Rs.

2,43,873 in year 2009 showing an overall increase.

Understudy of above table working capital overall increase

1,45,119 in 2008-2009.






CAPITAL

(In Rupees

000)

PARTICULARS 2009 2010INCREASE

Rs

DECREASE

Rs.

CHANGE

IN %

Current Assets

Advance 2,09,200 2,38,435 29,235 13.97

Stock 1,36,9352

69,104

67,831 49.54

Receivables 54,219

41,016

13,203 24.35

Cash 1210

1,557

347 28.68

Debtors 3,20,344 3,06,167 14,177 4.43

Bank 11,918

33,565

21,647 81.63

Total(a) 7,33,826 6,89,844

Current

Liabilities

Borrowing 2,08,818

1,98,968

9,850 4.72

Payables 21,053 24,057 3004 14.27



Surplus 10,431

12,113

1,682 16.12

Dividends 3,571 4,200 629 17.61

Total(b) 2,43,873

2,39,338

Networking

capital

4,89,953 4,50,506

Increase in

working capital

39,447 39,447

Total: 4,89,953 4,89,953 1,00,526 1,00,526

INTERPRETATIONS:

1. By observing the above table we can notice that the Gross Working

capital has increased during the year 2009-2010

2. From the above table there has been decrease in Current Assets

from

Rs 7,33,826 in the year 2009 to Rs. 6,89,844 in year 2010 showing

an overall decrease. And Current Liabilities decreased from

Rs.2,43,873 in year 2009 to Rs. 2,39,338 in year 2010.Showing an

overall decrease. Understudy of above table working capital overall

increase 4,535 in 2009-2010.

3. There it is to be noticed that greater the net Working Capital higher

liquidity, there is found 1year of Blue sta r.



RATIOS OF WORKING CAPITAL IN Bluestar Air Condtioners

MEASUREMENT OF CURRENT RATIO Bluestar air condtioners

MEASUREMENT OF CURRENT RATIO¶S

a) CURRENT RATIO:

Current ratio is the relationship between current assts and current

liabilities. This ratio¶s is a measure of general liquidity and is must

widely used to make the analysis or a short -term financial position or

liquidity of a company is calculated by dividing the total current assets by

total current liabilities.

CURRENT RATIO = CURRENT ASSETS /CURRENT LIABILITIES

The Ideal ratio of current ratio is= 2:1

(a) CURRENT RATIO

(b) QUICK RATIO



A) CURRENT RATIO ANALYSIS

YEAR/PARTICULARS 2005-06

(Rs)

2006-07

(Rs)

2007-08

(Rs)

2008-09

(Rs)

2009-10

(Rs)

CURRENT ASSETS 334495 394447 541374 733826 689271

CURRENT

LIABILITIES

62553 79995 196540 243873 237560

RATIO 5.35 4.93 2.75 3.01 2.90

Relatively high current ration is on indication of the companies liquidity

position and has the ability to pay its obligation in time as and when they

become due on the other hand a relating low current ratio represent that the

liquidity position of the company is not good and the company shall not be able

to pay its current liabilities in time without facing difficulties. An increase in

current ratio¶s represents the improvement in the liquidity position of a

company while a decrease in current ratio indicated that there has been a

deterioration in the liquidity position of company as a convention. The current

ratio of 2:1 is considered to be satisfactory. But in case of firms in India this is

about 1.3:1 is rather than 2:1 during to strict monetary policy of Reserve Bank

of India.



It can be observe from the above graph that the current ratio of the bank

moves 5.36to 2.90 during the study perform from 2005-06 to 2007-08.Generally

consider satisfactory ratio 2:1 the ratio of bank less than the consider satisfactory

ratio, this ratio indicate that the cushion over able to short-term creditors are

relatively lower. An average its standards at 2:1 which is less than the consider

satisfactory ratio of 2:1 that is every one rupee of current liabilities minimum 2

Rupees are available as margin of set.

0

1

2

3

4

5

6

2005-06 2006-07 2007-08 2008-09 2009-10

Series1



B) QUICK RATIO:

Quick Ratio also known as Acid Test or Liquid ratio is a more vigorousquick assets and current Liabilities. Quick ratio can be calculated by dividing the

total quick assets by total current liabilities.

QUICK RATIO = QUICK ASSETS / CURRENT LIABILITIES

Usually a high quick ratio is an indication that the company is liquid and has the

ability to meet its current or liquidity liabilities in time and on the other hand a low

quick ratio represents that the company liquidity position is not good. An increase

in the quick ratio reveals the liquidity position of the company improved. As a

general rule a quick ratio of 1:1 is considered to be satisfactory. But the acceptable

ratio for Indian firms may 0.80:1 instead of 1:1.



QUICK ASSETS = CURRENT ASSETS ± (STOCK+PREPAID EXPENSES)

II.QUICK RATIO:-

YEAR/PARTICULARS 2005-

06

(RS)

2006-

07

(Rs)

2007-

08

(Rs)

2008-

09

(Rs)

2009-

10

(Rs)

QUICK ASSETS 20219 336771 460033 596891 620167

CURRENT

LIABILITIES

62553 79995 196540 243873 237560

RATIO 4.48 4.21 2.34 2.45 2.61



Interpretation:

By the above table we can observe the quick ratio of the bank at 2006-07 is 2.45 but idle quick ratio is 1:1.

These ratios are used to know the liquidity positions of organizations. The

ideal ratio for Quick ratio is 1:1.The above graph shows the changes in quick

ratio from the year 2006-07 to 2007-08.In the year 2005-06 the quick ratio is

4.48,it is decreased to 4.21 in 2006.

In the year 2006-07 it is decreased to 2.34, in the year 2006-07 if we

compare with to 05-06 it is increased to 2.45, in the year 2007-08 it is increased

to 2.61.

0

1

2

3

4

5

6

2005-06 2006-07 2007-08 2008-09 2009-10

Series1



C) DEBT EQUITY RATIO = LONG TERM DEBTS / SHARE HOLDERS

FUNDS

YEAR/PARTICULARS 2005-06

(Rs)

2006-07

(Rs)

2007-08

(Rs)

2008-09

(Rs)

2009-10

(Rs)

LONG TERM DEBTS 2951 3233 1870 2529 12796

SHRE HOLDERS

FUNDS

160602 183979 211604 239850 302103

RATIO 0.02 0.017 0.008 0.011 0.04

SHARE HOLDERS FUND = SHARE CAPITAL + PREFERENCE SHARES

+GENERAL RESERVES



Interpretation:

From the above graph it can be observe that in the year 2007-08 the debt

equityratio is 0.02, which is decreased to 0.017 in the year 2007-08. in the year 07-

08 it is decreased to 0.008, in 2007-08 it is 0.011, in the year 2007-08 it is

increased to 0.08.

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

0.04

2005-06 2006-07 2007-08 2008-09 2009-10

Series1



D) Absolute Cash Ratio=Absolute assets / Current Liabilities

YEAR/PARTICULARS 2005-

06

2006-

07

2007-08 2008-09 2009-10

Absolute assets 58895 64094 99753 121380 163814

Current Liabilities 62553 79995 196540 243873 237560

Ratio 0.941 0.801 0.507 0.497 0.589

Absolute Assets= C.H + C.B + Short Term Investment+ Market securities



Interpretation:

From the above graph we can observe that the absolute cash ratio is

decreased compared to 2006-07 to 2005-06 is 0.941 to 0.801, in the year 2006-07

is 0.507 which is decreased to 0.497 in 2007-08.

In the year 2007-08 ratio is increased compared to 2007-08 is 0.689

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

2005-06 2006-07 2007-08 2008-09 2009-10

Series1



CHAPTER V

CONCLUSIONS

AND

SUGGESTIONS



CONCLUSIONS & SUGGESTIONS:

In the 5 years of this project work of working capital from 2005-2006 to 2006-2007. there is a highly increase in working capital in

2008-2009 to 2009-2010. It is a highlights of two years. But in

2007-2008 year there is a decrease in working capital.

Items, which our co-operative sells, our families must buy only

from the co-operative if we need to buy after co-operative shop is

close for the day, then we must learn to do with it till tomorrow.

On account may be buying from other shops. If co-operative sells

the same item.

It is better to see at reasonable rates and later to return to surplus to

members or add the services being provided to them.

Continuous internal audit by members / staff, appointed by

managing committee is must for every co-operative because it

exposes flaws early enough for rectifications.

Individual who have not bother to approach to the co-operative for

using its services it part has no business demanding membership at

the time of election.



FINDINGS:

In this chapter attempt is made to performs suitable suggestion to improve thefinancial performance of ³Blue star´

They are as follows

The society should take some remedial measures to control its productive

cost to increase its profits.

The society should decrease its unrecovered percentage of loans and

advances. It should study the credit worthiness for the members and based

on this should advanced loan.

If the society starts recording its non performing assets (BS A/C). It could

understand the current financial positions of its at the end of the year and it

could take necessary to control NPA¶S as this are productive

The society should decrease its long term borrowing (deposits) to decrease

the interest payment as it pays more EPS.

The ROI of society was recorded poor when compare to other financial

institutions.

it is due to rendering services to its members, even than it has to increase

the interest percentage slightly to survive and grow and serve its members .



BIBILOGRAPHY



BIBLIOGRAP HY

NAME OF THE BOOKS, PUBLISHERS AND AUDITORS

MANAGEMENT ACCOUNTING

KALYANI PUBLISHERS, 8th

EDITION

R.K. SHARMA &

SHASHI K. GUPTA

COST ACCOUNTING

KALYANI PUBLISHERS, 8

th

EDITION S.P. JAIN & K.L. NARANG

FINANCIAL MANAGEMENT PRINCIPLES AND PRACTICE

S.M. MAHESWARI

FINANCE MANAGEMENT

GALGOTIA PUBLICATIONS R.P. RUSTAGI

wc of bluestar

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