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A PROJECT REPORT

ON

WORKING CAPITAL MANAGEMENTIN

CREAMLINE DAIRY PRODUCTS LIMITED

Submitted to

OSMANIA UNIVERSITY

HYDERABAD

Submitted in Partial Fulfillment of the Award Of The

MASTER OF BUSSINESS ADMINISTRATION

BY

B.INDRASENAREDDY

(HT NO: 84-07-135)

SUPRABHATH INSTITUTE FOR MANAGEMENT AND COMPUTERSTUDIES (SIMACS)

(AFFILIATED TO OSMANIA UNIVERSITY)

CHEERYAL, HYDERABAD.

(2007-2009)

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DECLARATION

I hereby declare that the project report entitled WORKING CAPITAL

MANAGEMENT of Creamline Dairy Products Limited is carried out

under the guidance ofMr. K.MAHENDER faculty of the college and submitted

in partial fulfillment for the degree of MASTER OF BUSINESS

ADMINISTRATION or Osmania University is my original work and not

submitted by any other candidate the findings in this project are collected by

me.

Place:

Date:

B.INDRASENAREDDY

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ACKNOWLEDGEMENT

I express my deep sense of gratitude to Mr.G.Veerabrahmam Manager-

Accounts ofCreamline Dairy Products Limited for giving permission to me to take

up this project work. I am thankful to staff members and finance Director of

Cramline Dairy Products Limited, for giving their valuable time by providing in

completion of my project work.

I express my sincere thanks to my project supervision Mr.K.MAHENDER

REDDY faculty of finance, Suprabhath institute for management and computer

studies for giving inspiring and expert guidance rendered to me in carrying out this

project work.

I would also thankful to Mr.RAMNENDERLAL principal. I would also

thankful to faculty members of Suprabhath Institute for Management and

Computer Studies for attending their co-operation and encouragement in this

project work.

B.INDRASENAREDDY

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Table of Contents

Chapter I Introduction

o Scope of the study

o Objectives of the study

o Methodology of the study

o Limitations of the study

Chapter II Company Profile

Chapter III Organization Charts

Chapter IV Industry Scenario

Chapter V Working Capital Management and a theoretical

framework

Chapter VI Working Capital Management Analysis

Findings & suggestions

Chapter VII Conclusions

Chapter-VIII Bibliography

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CHAPTER-I

INTROUDUCTION

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INTRODUCTION

This chapter deals with the introduction of study in respect of subject matter of

project, need of the study, objectives of the study, scope of the study, Methodology

and Database used in the project and period of eth study of the project.

Introduction of the study:

Some definitions of Working Capital:

1. Mead, Molott and file:

Working Capital means current assets.

2. J.S.Mill:

The sum of the current assets is the working capital of a business.

3. C.W.Gersten Berg:

Working Capital has ordinarily been defined as the excess of current assets

over current liabilities.

Working Capital Management concerns with the problem that arise in

attempting to manage the current assets. The current liabilities and inter relationship

that exist between them.

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Finance is the lifeblood of any organization and working capital management

is an integral part of the overall financial management. Working Capital is essential

for the smooth and successful running of any business organization.

Two concepts of working capital now in vogue are found useful in the

management of working capital.

Gross working capital

Net working capital

Gross concept of working capital to the firms investment in current assets.

Net concept refers to the difference working between the current assets and current

liabilities of the firm.

This study is mainly concerned with investment in current assets. There are two

types of assets i.e., fixed assets and current assets. Both types of assets are to be

managed efficiently to make maximum profits with minimum possible investments.

Decisions regarding investment in fixed assets are taken through the capital

budgeting process. Current assets are the assets, which change their form with in

one year. Working capital management in corned with administration of these current

assets.

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NEED OF THE STUDY

Working capital management is one of the key areas of financial decision

making. It is significant because, the management must see that an excessive

investment in current assets should protect the company from the problems of stock-

out. Current assets will also determine the liquidity position of the firm.

The goal of working capital management is to manage the firm current assets

and current liabilities in such a way that a satisfactory level of working capital ismaintained. If the firm cannot maintain a satisfactory level of working capital. It is

likely to become insolvent and may be even forced into bankruptcy.

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OBJECTIVES OF THE STUDY

To study the existing system of working capital management.

To determine the flow of revenue from operations by taking into consideration

on working capital related ratios.

To examine the feasibility of present system of managing working capital.

To appraise the reason for the change in working capital position with help of

statement of changes in working capital.

To analyze the financial performance of the company with reference to

working capital.

To give some suggestions to the management based on the information

studied.

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METHODOLOGY

The study of management working capital is based on primary as well as

secondary data.

The primary data was gathered through personal interaction with finance manager.

The secondary data was collected from companys annual reports from 2004-

2008, various books and internet.

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LIMITATIONS

Due to time constraint a comprehensive meticulous study was not possible.

As a result there might be changes of errors creeping in.

Owing to the busy schedule of the executives and the staff in the company,

exhaustive primary data could not be collected, which might affect the result

of the study.

Recommendations of the study are only personal opinions. Hence judgments

may not be considered as ultimate and standard solutions.

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Chapter-II

Company profile

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INTRODUCTION

INDUSTRY BACKGROUND:

Indias Agriculture, having achieved the satisfactory level of self-sufficiency in

crop production, has started spreading its wings in dairy segment to enhance the

quantum of animal proteins in daily diet through milk. Dairying has been now

recognized as catalyst for economic development and is today accorded the status

of thrust area by the government. In the emerging string agriculture scenario,

livestock production in general and dairying in particular has been identified as an

important tool for enhancing the income of small farmers and reducing

unemployment in large rural population. The operation Flood, the appreciableconcept of government has created necessary infrastructure in improving the

performance of the dairy sector in the country.

India is the largest producer of milk in the world. Dairy development in India

has been acknowledged the world over as one of the modern Indias most

successful development program. Increasing awareness on nutritional diet coupled

with the anticipated growth in the purchasing power in urban areas, the demand for

milk in the country is expected to go up further steeply. Today, milk is Indias second

most important agriculture activity in terms of value of its output ranking next to

paddy but much above wheat

DAIRY BUSINESS:

Industry Structure and Developments

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Indias Annual Milk Production is growing @ 3% per annum, per capita milk

availability is growing only @ 1.5% per annum, ghee consumption is growing @ 8%

per annum and butter and cheese consumption is growing @ 10% per annum. If the

same trend continues, demand for dairy products will soon exceed supply. The milk

production in India accounts for more than 13% of the Worlds total output and 57%

of Asias total production. However the animal productivity in India is very low as

compared to Western Counties. The Worlds average milk yield per animal per year

is 2100Kgs whereas Indias average milk per animal per year is 1000kgs.

The unique aspects of dairying in India include:

Production of milk from buffalo exceeds cow milk production. Buffalo yield

less milk than crossbreed cows, but are well adapted to the extreme heat and

humidity of India. Moreover, many Indians prefer buffalo milk over cow milk

because of its higher butterfat content.

In India, feed for dairy animals consists mainly of crop residues and by-

products. Forage and feed grain production is limited due to pricing incentives

to grow cereals and pulses to feed Indias vast population.

India has an extensive government-supported dairy co-operative structure.

Co-operatives not only market their members milk, but also supply feed and

many dairy services. Private dairy companies tend to duplicate the operating

procedures of the co-operatives.

Trends of Milk products in India and Andhra Pradesh

India produced about 100 million tons of milk in 2008, accounting for 15

percent of total world production. Average milk yield in India, at 800 kg per dairy

animal per year has been increasing steadily between 2000 and 2008 at an average

annual rate of 3.8 percent.

Andhra Pradesh (AP) accounts for 8.4 percent of the national dairy animal

population and produces 8% of the countrys milk. Andhra Pradeshs milk production

comes mostly from farms of less than 2 hectares with 1 to 4 Dairy animals. The milk

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yield in Andhra Pradesh is slightly higher than the Indian average and is increasing

at a faster rate. Farm gate milk prices, however, are slightly lower than the average

for India.

Impacts on Household Income

Current situation: The dairy activities contribute 16% of the daily per capital

household income. With this per capita income, this household can afford

considerably low living standards, which has no yet set benchmark under Indian

conditions. The dairy development programs announced by the Central government

have the potential to increase the per capita household income by 27 percent above

its current situation.

PROFILE OF THE COMPANY

Name of the company : CREAMLINE DAIRY PRODUCTS LIMITED

Registered &

Corporate Office : 1-11-252/11/1,

Motilal Nagar,

Begum pet,

Hyderabad 500 016.

Date of incorporation : 31-10-1986.

Constitution : Incorporated as a Private Ltd October 31st 1986

And converted into Public Limited 24th April 1994.

Date of Commencement of

Commercial production : 1st December, 1990.

Sector : Private.

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Brand Name : J E R S E Y

Present Works

Packing facilities : UNIT 1: Survey No.547,

Uppal Khalsa,

IDA, Uppal,

Hyderabad.

UNIT 2: Survey No. 795-1 & 797.

Madanapalle,

Chittoor Dist,

Andhra Pradesh.

UNIT 3: Survey No.9/1,

Orakkadu Village,

Chennai.

UNIT 4: Survey No. 21,

Epuru Village,

Pedapadu Mandal,

Via Hanuman Junction,

West Godavari Dist

.

UNIT 5: Survey No.80, Goudagere Village,

Malavalli, Mandya Dist,

Karnataka.

UNIT 6: Pidathalagudipadu, Ongole

Prakasam Dist,

Andhra Pradesh.

UNIT 7: At Post Agini,

Kamptee Taluk, Nagpur Dist,

Maharashtra

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Line of Activity : Processing of milk and milk products

Products Description : Toned Milk, Whole Milk, Flavored Milk, Butter, Skimmed

Milk Powder, Ghee, Ice Creams, Curd, Butter

Milk, Doodhpeda, Paneer, Lassi etc.

Installed Capacity : Milk Packing Unit

-Uppal : 2, 20, 000 LPD

-H.Junction : 75,000 LPD

-Madanpalle : 70,000 LPD

-Chennai : 1, 00,000 LPD

-Malavalli : 25,000 LPD

-Kamptee : 25,000 LPD

: Powder Plant

-Ongole : 1, 50,000 LPD

Directors : Sri K Bhaskar Reddy - Managing Director

: Sri M Gangadhar - Finance Director

: Sri C Balraj Goud - Marketing Director

: Sri D Chandrasekhar Reddy Technical Director

Bankers : ICICI Bank,

Begumpet Branch,

Hyderabad.

: State Bank of India,

Commercial Branch, Koti

Hyderabad.

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Main objectives of the company:

To manufacture all kinds of milk products.

To manufacture, purchase and sell all kinds of flavored milk

products

To carry on as a growing business

To conclude collaboration agreements

Vision of CDPL:

To increase per capita consumption of milk

To empower the rural environment

To ensure a steady supply of milk

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CHAPTER - X

Long Term Vision

To be recognized in the dairy industry for superior customer service and

ability to continuously add value to our customers requirements.

To be recognized in the Indian business community as a model for our

professional approach to the way in which manage and develop our people.

To have effective business processes and information systems that assists us

in making the correct decisions.

To be one of the leaders within the Dairy industry in Indian in regards to

driving environment. Standards.

To have a mind-set across all people within milk and milk products of

continuous improvement of innovation in everything we do.

Through understanding of the consumer's needs and priority to fulfill the

needs.

Strong technical competence and an ability to use that to provide high quality

products to Customers.

Sound knowledge of the customer's perception of value for money (i.e. Cost /

benefit).

Excellence in the management of the whole supplies chain in order to deliver

least totalcost.

Quick response time to any type of inquiries or request.

Good reputations, credibility and stability the industry.

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BACKGROUND OF THE COMPANY

1) HISTORY OF THE COMPANY

Cream line Dairy Products Ltd, (CDPL) is engaged in the business of

processing and selling of liquid Milk, Butter, Ghee, Ice Cream and other related milk

products like Flavored Milk, Lassi, Curd, Buttermilk, Paneer & Milk Sweets under the

brand name of JERSEY . The Registered office of the company is located at 1-11-

252/11/1, Motilal Nagar, Begumpet, Hyderabad 500016. It is an existing profit

making public limited company, certified as ISO 22000:2005 Company for the Food

Safety Standards being adopted. The company was originally incorporated as a

private limited company in 21st April 1994. The milk processing plants of the

company are located at Uppal (Hyderabad), Madanapalle (Chittoor Dist), Orakkadu(Chennai), Mallavalli (Bangalore), Kamptee (Nagpur), Hanumanjuntion (Vijayawada)

& Ongole. CDPL is one of the largest and well-established dairy units in the

organized sector in South India. CDPL has a well-established marketing network

spread across all major districts of Andhra Pradesh, Tamilnadu, Karnataka & part of

Maharashtra. CDPL has been expanding its market topographically in the liquid milk

segment in Karnataka and Tamilnadu. CDPL enjoys premier status in liquid milk

segment by marketing 4,00,000 Liters per day (LPD). CDPL is managed by Dairy

Technologists and professionals. The promoter Directors hold functional

responsibilities and are actively engaged in the day-to-day operations of the

company.

CDPL was originally conceived to process 1500 LPD of milk. The project was

appraised and funded by AP state Financial Corporation. The project was funded

through equity capital of Rs.9.50 lakhs from Promoters, state subsidy of Rs 1.93 lakh

and Term Loan of Rs 28.15 lakhs from APSFC. The plant was commissioned at

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Mupireddypally village Medak dist, Andhra Pradesh, and its commercial production

Commenced on 1st December, 1990. CDPL had initially processed 1500 LPD of milk

and manufactured Milk products like Flavoured Milk, Ghee and Butter etc., and the

same have been marketed in the twin Cities of Hyderabad and Secunderabad under

the brand name JERSEY. CDPL products are well accepted by the consumers.

During the year 1992-93, CDPL decided to increase and economize its

volume of operations and entered the liquid milk market with Toned and Whole Milk.

This Strategic decision has been taken after careful vendor development activity for

procuring raw milk to cater to the increased volume of operations. This has, apart

from increasing the volume of operations, ideally positioned the products in the

market and stabilized the brand image. CDPL has gradually increased its installed

capacity from 1500 LPD to 44500 LPD in March 1996 at its Mupireddypally plant.

Equity share capital and hire purchase funded the gradual increase of installed

capacity.

In 1993, CDPL has introduced the novel concept of round the clock parlors

covering entire strategic Locations of twin cities for exclusive marketing of companys

products. CDPL also has well-established network of booths for distribution of liquid

milk. This has enabled the consumer to have an easy and all time access to milk

and milk products.

CDPL had expanded its milk processing capacity from 44500 LPD to 74500

LPD and increased the production facility of Ghee & Butter from 365000 Kgs to

1460000 Kgs at Uppal plant, with a capital out lay of Rs. 830 Lakhs. The expansion

was funded through a term loan of Rs. 540 Lakhs from IDBI and equity share capital

of Rs.290 Lakhs. CDPL has been continuously expanding its capacities in modular

form. CDPL has gradually increased its installed capacity from 74500 LPD to

220000 LPD in March 2007 at its Uppal Plant. This gradual increase in installed

capacity on need-basis was done only through internal accruals of the company.

CDPL has established several chilling centres in various districts of the states of

Andhra Pradesh, Tamilnadu & Karnataka for procurement of buffalo and cow milk

and the details of which are enclosed in Annexure I, apart from buyback

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arrangement for procurement of buffalo milk from chilling centers, who are

associates of CDPL.

CDPL has been expanding its market topographically and has successfully

marketed its liquid milk in all major districts of Andhra Pradesh, Tamilnadu &

Karnataka. Continuous plans are on the anvil to expand the aforesaid markets.

2) MANAGEMENT:

CDPL is managed by a team of qualified professionals. CDPLs Board

comprises of highly qualified and experienced Technocrats and professionals. The

day-to-day operations are looked after by Mr.K.Bhaskar Reddy under the guidance

of the Board of Directors. The Managing Director is being supported by Mr. C.Balraj

Goud, Director (Marketing) in marketing activities, Mr. D.Chandrasekhar Reddy,

Director (Technical) in project implementation, production and technical functions

and Mr. M.Gangadhar, Director (Finance) in financial, administrative functions of the

company. The top management team is well assisted by team of qualified and

experienced personnel.

3) BACKGROUND OF THE DIRECTORS:

Sri K.Bhaskar Reddy aged 48 Years, is a Graduate in Dairy Technology from

Osmania University. He has more 20 years of experience in Dairy & related Agri

business. He is a promoter Director since inception of the Company.

Sri M.Gangadhar,aged 53 years, fellow member of institute of Chartered

Accountants of India (ICAI), has more than 25 years of experience in the field of

finance and accounting. He is involved with the Company as a promoter for the last

two decades. He was associated with Sangam Dairy as DGM - Finance and gained

vast experience in dairy related Accounting, Finance and Costing aspects.

Sri D Chandrasekhar Reddy, aged 47 years, is a graduate in Dairy

Technology from Osmania University. He is involved with the Company as a

promoter for more than two decades. He had earlier worked as Technical Officer in

Sabarkantha District Milk Producers Union Limited, popularly known as SABAR

DAIRY, part of AMUL organization for two years. His vast experience in processing

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of various milk products and expertise in Technical, plant maintenance and

operations are put to effective use to strengthen the technical aspects of the

company

Sri.C.Balraj Goud, aged 48 years, has vast experience in commercial

activities and has considerable exposure to marketing of Milk and Dairy Products. He

is involved with the Company as a promoter for more than two decades.

4) KEY EXECUTIVES:

Name Designation Qualifications

Sri K Bhaskar Reddy Managing Director B.Sc., (Dairy-

Tech)

Sri M Gangadhar Finance Director F.C.A

Sri C Balraj Goud Marketing Director M.A,L.L.B

Sri D Chandra Sekhar Reddy Technical Director B.Sc., (Dairy-

Tech)

Dr.K.Srihari Rao Technical Advisor M.V.Sc

Sri A Anand G.M - Finance A.C.A

Sri.P.Sree Sree G.M Quality Assurance M.Sc.,(Dairy-Tec)

MBA

Sri G Madhukhar Reddy GM,SBU-Bangalore B.Sc., (Dairy-

Tech)

Sri G Devanath Reddy GM,SBU-Chennai M.B.A

Sri G Lakshmi Prasad GM, SBU-Hyd M.Sc., (Dairy-

Tech)

Sri P Sashi Kumar GM, SBU-Nagpur

M.Tech(Dairy).,MBA

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Traditional Ghee

Cow Ghee

Milk Powders:

Milk Powder

SMP Partly SMP

Coffee / Tea Whitener

Milk Shake Mix Powder

Banana Milk Powder

Mango Milk Powder

Ice Cream Mix Powder

Kulfi Mix Powder

Cultured Products:

Dahi

Yoghurt Butter Milk

Lassi

Shrikhand

Mishti Doi

Coagulated Products:

Cheese

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Paneer

Casein

Sweets:

Peda

Burfi

Khalakand

Jamoon

Rasagulla

Rasmalai

Basundhi

Kheer

Khoa

Beverages:

Sterilized Flavoured Milk

Milk Shake

Hot / Cold Milk

Coffe

Tea

Whey Drink

H)Ice Creams & Novelties.

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PRODUCTS AND MANUFACTURING PROCESS

1.1 PRODUCT PROFILE

The company has manufacturing and marketing of the following products :

1) Toned Milk:

Toned milk is the pasteurized milk with 3% Fat and 8.5% Solids-Non-Fat (SNF).

2) Standard Milk is the pasteurized milk with 4% Fat and 9% SNF.

3) Whole Milk is the pasteurized milk with 6% Fat and 9% SNF

4) Table Butter is product exclusively obtained from cream after removal of moisture

and SNF. it contains 82% of Fat.

5) Ghee is a product obtained from butter after removing 100% SNF. It contains 98%

Fat.

6) Flavored Milk

7) Lassi

8) Youghurt / Curd9) Butter Milk

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1.02 MILK PROCESSING

The raw milk purchased and stored in milk silos are transferred to the milk

processing Zone for pasteurization with the heating and cooling treatment. In this

process the raw milk is heated to 81-degree Celsius for 20 seconds and then cooled

suddenly to 4 degrees Celsius. The milk will then be sent to separation Zone for

separation in to cream and skimmed milk with the help of cream separator. The

cream and pasteurized skim milk will be stored in insulated storage tanks. The

pasteurized milk is standardized to require fat level and SNF content by mixing

cream and skimmed milk in appropriate quantities. The standardized milk Is then

packed in pouches and stored in cold storage. It is then distributed and sold through

refrigerated retail outlets.

1.03 TABLE BUTTER

The chilled cream will be fed into butter churn for conversion into butter and

buttermilk, the required quantity of salt is then added to the butter to form Table

Butter. This added salt absorbs the water droplets left in the butter. Salt also

prevents chemical and bacteriological actions. The salted butter are then sent to

packing and filling section for proper packing and kept under cold storage for onward

dispatch.

1.04 GHEE MAKING

The quantity of white butter earmarked for ghee making will the melted in the

melterad then heated in the plate heater. The heated butter is stored at 45 degree

Celsius in stratification tanks for about two hours. During this process fat and water

content in butter are separated. The water phase is being removed leaving the fat

filled butter content, which are then transferred for cooking to the ghee boiler. The

ghee so produced will then be filtered, clarified and granulated. The granulated ghee

are then sent to packing and tilting section for proper packing and kept under cold

storage for onward dispatch.

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1 05 FLAVOURED MILK

The pasteurized milk with 1.5% fat content are used for flavored milk. Sugar

and the required flavors are added to the pasteurized milk and homogenized. The

flavored milk is treated for extended shelf-life. Then flavored milk is filled in the

bottles and sterilized and stores for onward dispatch.

1.06 BUTTERMILK

The composition and food value of buttermilk are comparable with skim milk

with the exception that it may contain slightly more milk fat. Owing to the

decomposition of lactose by bacteria, buttermilk frequently contains from 0.2% to

nearly 1% of lactic add. The presence of lactic acid in buttermilk is not harmful and

may be beneficial.

GROWTH IN FOCUS

We, Cream line Dairy Products Ltd., harness our creative energies through

a strong teamwork, a spirit of enterprise and financial acumen, proven qualities that

collectively determine our path of growth.

We are poised to test new waters, grow more business, increase our

returns and create greater stockholder value, bringing heightened levels of

confidence and satisfaction to every stakeholder.

We are poised to take on new challenges and move on to creating products

and markets for tomorrow.

We have grown, and intend to grow, focusing on harnessing our willingness

to experiment and innovate, our ability to transform, our drive towards excellence in

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quality, our people-first attitude and our strategic direction. The future of the

Organization rests on these enablers, which shall be the investment, Cream line

Dairy Products Limited makes for carving itself.

BUSINESS REVIEW

Cream line Dairy Products Limited (CDPL) has been in Dairy Business

successfully for about two decades and presently it is one of the leading dairies in

India. During the last financial year CDPL has ventured into a high growth. As a

result, CDPLs presence in the market has been very quickly recognized as unique

and one of the best retail business models in the Industry.

OUTLOOK

The future of the dairy industry has to be built on quality. Our Company

emphasizes the regulation that will not just enable the healthy and orderly growth of

dairy industry but will ensure that milk and milk products are produced, processed,manufactured, stored and sold by observing the best standards of sanitation,

hygiene, quality and food safety. To achieve this object, our Company is undertaking

major expansion in Dairy Business by investing Rs.15 Crores during 2008-09 and

over 20 Crores during 2009-20.

Product/Market wise Performance

The total Turnover during the financial year 2007-08 was Rs.335 Crores as

against the Turnover of Rs.249 Crores in 2006-07. Today Jersey distributes quality

milk and milk products in the states of Andhra Pradesh, Tamilnadu, Karnataka & part

of Maharastra.

During the year 2007-08 liquid milk sales was Rs.241 crores against Rs.202

crores in the previous year. The sales of Milk Products including Bulk sales of

Cream, Ghee, SMP and Butter were recorded at Rs.94 Crores against Rs.47 Crores

in the previous year.

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Strategy Urban

The objective of the urban strategy is to address the planned food and

grocery purchases of household with an element of convenience built into the model

through Home deliveries. Moreover the business aims to retain and attract new

customers through quality of Fresh products. The value preposition is not to be an

ELVP (Everyday Low Value Prices) Retailer but to provide value to the customer

through quality, exceptional service and convenience.

Due to high importance of touch and feel factor, it was decided to have some

retails interface that will help CDPL to connect to the consumers through their

traditional buying process and then gradually work towards converting them to the

home delivery model. It would require consistent interaction with the customer that

would be facilitated through detailed business procedures, training and IT initiatives.

Another important element is the private label to differentiate the offerings

from the competitor as well as give superior products to consumers at value pricing.

When fully deployed, almost 50% of the entire product of Skimmed Milk Powder will

be own sourced or private label.

Strategy-Rural

CDPL has an established supply chain of their own dairy business, which

procures milk from farmers in Rural Aras (mainly in Andhra Pradesh, Tamilnadu,

Karnataka & some parts of Maharastra). The starting point will be to harness the

current infrastructure to penetrate into the rural market, eg. instead of direct retail

presence, milk collection agents will be mobilized for selling products, reverse

logistics in the supply chain can be used to transfer of goods from the urban markets

to rural markets; thus able to disinter-

meiate the supply chain cost, provide benefits to the rural customer and improve

better penetration into the rural areas.

It will connect to consumers through Representatives (predominantly current

Milk Collection Representatives of CDPL) who will sell the goods (mainly FMCG) to

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the consumers. The value preposition for the rural customer will be the availability of

the quality/genuine FMCG products mostly branded ones at a better price. This will

also provide opportunity to CDPL to launch & strengthen their private label in rural

markets, which is slightly easier turf for private label than the urban markets.

CUSTOM FARMING

Custom farming allows a landowner who wishes to remain classified as a

farmer and the ability to retain close control of the farm business but not be actively

involved in performing day-to-day activities. The landowner would make all the

farming decisions such as purchasing all inputs and receive all income from sales.

Under custom farming, our Company indentifies a particular zone, which is

the best for certain crops and maps each zone into different clusters after tie-up with

the farmers. Based on forecasted demand, trained team from Agri division of our

company prepares cropping plans and crop rotations for each cluster and

accordingly crops will be grown depending upon the zone and the season. Under

this custom farming there is no contractual obligation between the farmer and

Company and the farmer is at liberty to sell his produce to any one.

RISKS AND CONCERNS

All key functions and divisions are independently responsible to monitor risk

associates within their respective areas of operations such as production,

procurement, treasury, insurance, legal and other issues like health, safety and

environment.

In production process, the Company has its own efficient Distribution

Control Systems. The system automatically controls all the fluctuations of parameter

of producing and do not give any chance to excessive losses and wastages. It

provides the process a continuous flow of working without any interruption by any

reasons. This definitely improved on productivity and profitability.

HUMAN RESOURCES

The Companys human resources philosophy is to establish and build a

strong performance and competency driven culture with greater sense of

accountability and responsibility. The company has taken pragmatic steps to

strengthen organizational competency through involvement and development of

employees as well as installing

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Effective systems to improve the quality and accountability at all functional

levels. With the changing and turbulent business scenario our basic focus is to

upgrade the skill and knowledge level appropriate leadership at all levels, motivating

them and inspiring them to stretch and take-up higher responsibility. The recruitment

process is in complete synchronized with the organization Vision and Mission.

Our Company continues to believe that, stake holder growth is directly

proportional to the organization growth and hence, continuous efforts are being

made to satisfy the stakeholder, to realize the same across the organization.

Changing global business scenario, faster globalization process, booming

Indian economy as well as the industry, increased employment opportunities and

acute talent shortage in the industry has thrown a great challenge in recruitment

and retention of talent. Hence compensation management is set to meet the

industry standards and which more closely matches and monitors the business

goals and objectives. The vibrant Compensation management policy of our

company is completely integrated with the long term and short-term business goals

of the organization.

In the competitive world of business, your company strongly believes in

developing the Human Potential to meet the growing challenges. Hence HUMAN

POTENTIAL DEVELOPMENT is obvious growth. Our company aims at getting

best out of every professional in the organization to realize the business goals.

Simultaneously your company is putting in lot of efforts at an organizational level to

take a leap growth and success across the organization.

S W O T ANALYSIS

STRENGTHS:

CDPL is an existing profit making company. The turnover of the company has

been showing continuous increasing trend.

CDPL has been managed by experienced Dairy Technologists and

professionals. All the Promoter Directors are actively involved in the

functional activities of the Company.

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CDPL has strong foundation for milk procurement by establishing various

chilling centers spread in South India to procure required quantity of high

quality milk. Further the company has a well-established procurement net

work for sourcing raw milk. CDPL has established marketing network through round the clock parlours &

milk booths for marketing of milk and milk products.

The products of the company have been well received by the customers. The

demand for the companys products is increasing.

CDPL has the patronage of the farming community spread over 2000 Villages

in Andhra Pradesh, Karnataka, Tamilnadu & part of Maharastra.

WEAKNESS:

Inability to feed cattle adequately throughout the year by the farmer remains

the most widespread technical constraint to higher milk yield.

Quality dairy animals are in short supply. Artificial insemination service for

breeding better cattle has still limited coverage.

The raw milk availability is seasonal and is the governing factor for the

capacity utilization.

OPPORTUNITIES

The mass production of indigenous milk-based sweets, milk powder, butter

and ghee in modern dairy plants can tap the growing demand for them. With

300 million NRI overseas, the scope for their exports is promising.

Vast scope exists to higher milk yield through better use of crop residues and

by-products by upgrading them. Emphasis must be on technologies that are

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simple, low-cost and easily adaptable to increase their nutritive value. Some

economic incentives are needed for farmers to go in for better feeding.

Similarly, paying attention to animal health care would minimize the economic

losses caused by many major cattle diseases such as rinderpest, mastitis andFMD.

The growing demands for liquid milk and milk products in the Metropolitan

Chennai city and neighboring areas is highly encouraging for the dairy

industry.

The demand for other dairy related products is increasing due to growing

population and changing life style.

THREATS:

Large cattle population grazing on uncultivated lands, forest areas and

common property resources. This imposes a heavy social cost, leading to

degradation and denudation of land and loss of natural resource base.

De-Licensing has checked in flow of investment by Co-Operatives in

procurement and related infrastructure in their milk shed districts. It has alsoaffected extension services for enhanced milk production.

Since the dairy industry is now open for private sector there bound to be

competition from the new units apart from the existing Co-Operative Unions.

The co-operative unions are distributing the milk through organized sectors.

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CHAPTER-III

ORGANIZATION CHARTS

ORGANISATION CHART OF CDPL

CHAIRMAN

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STRUCTURE OF

THE FINANCE DEPARTMENT IN CDPL:

FINANCE DIRECTOR

MANAGING

FINANCE

DIRECTOR

TECHNICAL

DIRECTOR

MARKETING

DIRECTOR

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The Director of Finance heads the organization chart of Finance Department. There

are 4 main sections:

- Manager (Accounts)

- Company Secretary

- Purchase Accounts Officer

- Cash and Bank Accounting Assistance Officer.

MANAGER

ACCOUNTS

COMPANY

SECRETARY

PURCHASE

ACCNTSOFFICER

CASH&BANK

ACCTNGASSTOFFICER

GNRL ACCNT

& EDP

OPERATIONS

SR.ACCNTT

SALES

ACCNT

JR. ACCNTT

PAROLLACCNTOFFICER

JR.ACCNTT

JRACCNTT

ACCNT

FINALISA

TION

SR.ACCNTT

SR.ACCNTT

ADVANCESOFFICER

ASSET

CASHIER

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Under the Manager (Accounts) there are 5 subsections:

o The General Accountant and EDP Operation

o The Sales Accountant Officer

o The Payroll Accountant Officero The Accounts Finalization Officer

o The Advances Officer

Under the purchase Accounts Officer there are 2 sub-sections:

o Senior Accountant

o Junior Accountant

Under Cash and Bank Accounting Assistance Officer there are 2 sub-sections:

o Assistant

o Cashier

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CHAPTER-IV

INDUSTRY SCENARIO

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INDUSTRY SCENARIO

INDIAS DAIRY SCENARIO

Indias Agriculture, having achieved the satisfactory level of self-sufficiency

in crop production, has started spreading its wings in dairy segment to enhance the

quantum of animal proteins in daily diet through milk. Dairying has been now

recognized as catalyst for economic development and is today accorded the status

of thrust area by the government. In the emerging string agriculture scenario, livestock production in general and dairying in particular has been identified as an

important tool for enhancing the income of small farmers and reducing

unemployment in large rural population. The operation Flood, the appreciable

concept of government has created necessary infrastructure in improving the

performance of the dairy sector in the country.

ANDHRA PRADESH DAIRY SCENARIO

The Andhra Pradesh Dairy Development Co-operative Federation

(APDDCF) which spearheads the dairy movement in the state, worlds on a three-tier

and pattern co-operative structure providing benefits to more than seven lakhs milk

producer families all over the state. The structure has helped the federation in

building a network of 10 district diaries, 8 milk product factories and about 66 chilling

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centers spteak all over the state. The system is aided by 3556 co-operative

societies, 310 exclusive women societies and 4495, association In the procurement

of milk from farmers at different levels. The overall labour investment in livestock

farming can be as high as 73 percent compared to 27 percent in crop farming.

About 2.43 lakhs small and 2.25 lakhs marginal farmers constitute a major part of the

membership in co-operative societies, the other major group being 1.15 lakhs large

farmers

CHAPTER-V

Working Capital Management

ATheoretical Frame Work

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Introduction

Working Capital:

Cash is the lifeline of a company. If this lifeline deteriorates, the companys

ability to fund operations, reinvest and meet capital requirements and payments also

deteriorates. Understanding a companys cash flow health is essential for making

investment decisions. A good way to judge a companys cash flow prospects is tolook at its working capital management (WCM).

Working capital of a company reveals more about the financial condition of a

business than almost any other calculation. It tells you what would be left if a

company raised all of its short term resources, and used them to pay off its short

term liabilities. The more working capital, the less financial strain a company

experiences.

Working Capital also gives investors an idea of the companys underlying

operational efficiency. Money that is tied up in inventory or money that customers sill

owe to the company cant be used to pay off any of its obligations. Sa if a company

is not operating in the most efficient manner (slow collection) it will show up in the

working capital. This can be seen by comparing the working capital from one period

of time to anothers slow collection may signal an underlying problem in the

companys operations.

Defination:

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The definition of working capital is the difference between an organizations

current assets and its current liabilities of more importance is its function which is

primarly to support the day-to-day financial operations of an organization, including

the purchase of stock, the payment of salaries, wages and other business expences,

and the financing of credit sales.

Its a measure of the both a companys efficiency and its short-term financial health.

The better a company manages its working capital, the less the company needs to

borrow. Even companies with cash surplus need to manage working capital to

ensure that those surpluses are invested in wys that will generate suitable returns for

investors.

There are two concepts of working capital. They are the gross working capital

and the net working capital. The term gross working capital, also reffered to as

working capital means the total current assets.

The term Net working capital can be defined in two ways:

The most common definition of net working capital is the difference between

the current assets and the current liabilities.

The alternative definition of NWC is that portion of current assets which is

financed with long term funds. Since the current liabilities represent the

sources of the short term funds, as long as current assets exceed current

liabilities, the excess must be financed with long term funds.

The net working capital, as a measure of liquidity is quite useful for internal

control. The net working capital helps in comparing the liquidity of the same

firm overtime.

Therefore:

Working Capital = Current Assets Current liabilities

A positive working capital means that the company is able to pay off its short-

term liabilities. A negative working capital means that a company currently is unable

to meet its short-term liabilities with its current assets

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(Cash, Accounts, Receivables, Inventory)

Management must ensure that a business has sufficient working capital. Too

little of the working capital will result in cash flow problems highlighted by an

organization exceeding its agreed overdraft limit, failing to pay suppliers on time and

being unable to claim discounts for prompt payment. In the long run, a business with

insufficient working.

Capital will be unable to meet its current obligation and will be forced to cease

trading even if it remains profitable on paper. On the other hand, if an organization

ties up too much of its resources in working capital it will earn a lower than expected

rate of return on capital employed. Again this is not a desirable situation.

As it is said that working capital is the difference between the current assets

and the current liabilities, the management of the company has to manage their

current assets and current liabilities.

Therefore in order to understand how the working capital is managed we need

to first understand what are current assets and current liabilities of the firm.

Working Capital Management:

Management of working capital plays a very important role in the financial

management of a company because maintaining a balance of income to debt can be

difficult and owners must be diligent to assure that it is kept. Sometimes it takes a

little assistance to maintain levels of fluidity or make major purchases.

If working capital dips tip low, a business risks running out of cash. Even very

profitable business can run into trouble if they lose the ability to meet their short-term

obligations. Working capital financing can be used as a fast cash option to cushion

the periods when the flow is not ideal or readily available. Even when owners are

meticulous in managing working capital, finding the right levels to remain comfortable

and competitive can be difficult.

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The Important of Good Working Capital Management:

Working capital constitutes part of the companys investment in a department

associated with this is an opportunity cost to the company. If a department is

operating with more working capital than is necessary, this over investment

represents an unnecessary cost to the company.

From a departments point of view, excess working capital means operating

inefficiencies. In addition, unnecessary working capital increases the amount of the

capital charge which departments are required to meet.

Approaches to Working Capital Management

The objective of working capital management is to maintain the optimum

balance of each of the working capital components. This includes making sure that

funds are held as cash in bank deposits for as long as and in the largest amounts

possible, thereby maximizing the interest earned. However, such cash may more

appropriately be invested in other assets or in reducing other liabilities.

Objectives of Managing Working Capital:

Describe the risk-return trade-off involved in managing a firms working

capital.

Explain the determinants of net working capital.

Calculate the describe the basic sources of short-term credit.

Describe the special problems encountered by multinational firms in

managing working capital.

Working capital management takes place on two levels:

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Ratio analysis can be used to monitor overall trends in working capital and to

identify areas requiring closer management

The individual components of working capital can be effectively managed by

using various techniques and strategies

When considering these techniques and strategies, departments need to

recognize that each department has a unique mix of working capital components.

The emphasis that needs to be placed on each component varies according to

department. For example, some departments have significant inventory levels;

others have little if any inventory.

Furthermore, working capital management is not an end in itself. It is an

integral part of the departments overall management. The needs of efficient

working capital management must be considered in relation to other aspects of

the departments financial and non-financial performance.

Working Capital Ratio

Current Ratio =Current Assets

Current Liabilities

The working capital ratio attempts to measure the level of liquidity, that is the

level of safety provide by the excess of current assets over current liabilities.

The quick ratio a derivative. Excludes inventories from the current assets,

considering only those asses most swiftly realizable. There are also other

possible refinements.

There is no particular benchmark value or range that can be recommended as

suitable for all government departments. However, if a department tracks its own

working capital ratio over a period of time, the trends the way in which the

liquidity is changing will become apparent.

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Current Assets:

The term current assets refer to those assets which in the ordinary course of

business con be, or will be, converted into cash within one year without undergoing

any diminution in the without disrupting the operations of the firm. The major current

assets are cash, cash equivalent, marketable securities, accounts receivable,

inventory, prepaid expenses and other short term investments

.

CONSTITUTES OF CURRENT ASSETS:

1. Cash in hand and bank balances2. Bills receivables

3. Sundry debtors (less provision for bad debts)

4. Inventories

Raw Material

Work in process

Stores and spares

Finished goods

5. Temporary investment of surplus funds

6. Prepaid expenses

7. Accrued incomes

Current Liabilities:

The term current liabilities are those liabilities which are intended at the

time of their inception, to be paid in the ordinary course of business, with in a

year, out of the current assets or earnings of the concern. The basic current

liabilities are accounts payable, bills payable, bank overdraft and outstanding

expenses and current liabilities in detail.

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CONSTITUTES OF CURRENT LIABILITIES:

1. Bills Payable

2. Secured creditors or account payable

3. Accrued or out standing expenses

4. Short term loans, advances and deposits

5. Dividend payable (short term)

6. Bank over draft

7. Provision for taxation, it does not amount to appropriation of

profits

Working Capital Cycle: This shows the cash coming into the

business, what happens to it while the business has it and where it

goes. A simple working capital cycle may look something like:

Working

CapitalCycle

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a) Rate of stock turnover: A firm having a high rate of stock

turnover will need lower amount of working capital as

compared to a firm having a low rate of turnover

b) Credit Policy: Credit Policy of a concern in its dealings withdebtors and creditors influence considerable the requirements

of working capital.

c) Business Cycle: Business Cycle refers to alternate expansion

and contraction in general business activity.

PRINICIPLES OF WORKING CAPITAL

The following are the general principles of a sound working capital

management policy as follows:

(A) PRINCIPLES OF RISK

VARIATIONS:

Risk here refers to the in ability of a firm to meet its obligations as and

when they become due for payment. Larger investments in current assets

with less dependency on short - term borrowings increases liquidity,

reduces dependence on short-term borrowing increases liquidity, reduces

risk and thereby decreases the opportunity for gain or loss. On the other

hand less investment in current assets greater dependence on short -term loans increases risk, reduces liquidity and increases profitability. In

other words, there is a definite inverse relationship between the degree of

risk and profitability.

a) Principle of cost of capital:

The various sources of raising working capital finance have

different cost of capital and the degree of risk involved.

Generally, higher the risk lower is the cost and the lower the risk

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higher the cost. A sound working capital management should

always try to achieve a proper balance between these two.

b) Principle of equity position:

This principle is concerned with planning the total investment in

current assets. According to this principle, the amount of working

capital invested in each component should be adequately

justified by a firms equity position.

c) Principle of maturity of payment:

The principle is concerned with planning the total i9nvestment in

current assets. According to this principle, a firm should make

very effort to relate maturities of payment to its flow of internally

generated funds. Maturity pattern of various current obligations

is and important factor in risk assumptions and risk assessment.

(B)ESTIMATION OF WORKING CAPITAL

Following is the brief explanation of the various techniques of

estimating working capital requirements as follows.

a) Estimation of components of working capital:

Since working capital is the excess of current assets over current

liabilities, estimating the amounts of different constituents of

working capital can make an assessment of the working capital

requirements.

b) Percent of sales method:

This is traditional and simple method of estimating working

capital requirements. According to this method, on the basis of

past experience between sales and working capital requirements

a ration can be determined for estimating the working capital

requirements in future.

c) Operating cycle approach:

According to this approach, the requirements of working capital

depend upon the operating cycle of the business. The operating

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cycle begins with acquisition of raw materials and ends with

collection of receivables. The duration of the operating cycle for

the purpose of estimating working capital requirements is

equivalent to the sum of the duration of each of the operationcycle stages less than credit period allowed by the suppliers of

the firm.

SOURCES OF WORKING CAPITAL REQUIREMETS

The source of working capital requirements is classified into two typesthey are fixed source and variable source they are as follows:

(A) Fixed Source:

Shares.

Debentures

Public Deposits

Plaguing back of profits.

Loans from financial institutions.

(B)Variable Source :

Commercial banks

Indigenous bankers

Trade creditors

Installment credit

Advances

Accounts receivable - credit/ factoring

Accrued expenses

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Commercial paper

TYPES OF WORKING CAPITAL:

Every business enterprise must have adequate working funds for normal

operations. In addition, it has to make arrangements for extra funds to

meet seasonal demands or special orders.

(A) Permanent working capital:

It refers to the irreducible minimum reserves to be kept for

maintaining a normal level of stock of raw materials, workin-

progress, finished goods and for paying wages and salaries during the

year. It is permanently locked up in current assets. Permanent

working capital is of two kinds.

a) Initial working capital:

At its inception and during the formation period of its operation, a

company must have enough cash fund to meet its obligations. In

the initial years its revenues may not be regular and adequate,

credit arrangement may not be available from banks etc., till it

has established its credit standing and credit may have to be

granted on sales to attract the customers.

b) Regular working capital:

It is the amount needed for the continuous operations of the

business of the company. It refers to excess of current assets

over current liabilities, so that the process of conversion of each

into stock into sales, receivables and collections is maintained

without any break.

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(A) Variable or Circular

working capital:

Most of the business enterprises have to produce additional workingcapital to meet seasonal and special needs. On the basis, variable

capital is classified into two types

a) Seasonal working capital:

Obviously, it refers to financial requirements that crop up during

the particular season. Beyond their initial and regular circulating

capital, most business will require at stated intervals a large

amount of current assets to fill the demands of the seasonal busy

periods.

b) Special working capital:

All business enterprises have to be prepared to meet unforeseen

eventualities that may arise in the course of their operations.

Therefore, they must have extra funds at unstated periods to

meet contingencies.

Chapter- VI

Data Analysis

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Estimation of working capitalRequirements 2004-2005

Increase

Decrease

1.Current AssetsAmount Amount

Cash Balances

328163

65Inventories:

Raw material82155

320

Work in Progress74501

0

Consumables & Stores, Packing11514

894

Finished goods84560

845178976

069

Receivables:

Debtors10151

220

Loans & Advances41016

300511675

20

Gross working capital (A)262959

954

2. Current liabilities:

Creditors for purchases12119

745

Creditors for Wages

51196

503Others 26301

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632

Creditors for Overheads10881

652

Provisions23528

23

Total Current Liabilities (B)102852

355

Working Capital Gap160107

599

Working Capital Margin400269

00

Total Working Capital Requirement

120080

699


Increase

Decrease

1.Current Assets Amount Amount

Minimum cash Balances561667

00

Inventories:

Raw material121624

812


71

Packing materials724284

5

Finished goods555007

73194454

601

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Debtors129743

61


59631357

20

Gross working capital (A)

313757

021



48

Creditors for Wages375942

99


72

Provisions149883

3

Others 3584772


24


897


24

Total Working Capital Requirement 177924673


Increase

Decrease

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Minimum cash Balances627262

89

Inventories:

Raw material191574

435


29

Work in progress 126805

Consumables & Stores, spares106755

81


606340188

556

Receivables:

Debtors

280085

67


91926868

58

Gross working capital (A)495601

703



11

Creditors for Wages575312

02


4

Provision261868

4

Others248469

83


434


269


67

Total Working Capital Requirement290541

202

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Increases

Decreases


Minimum cash Balances

921211

78Inventories:

Raw material293662

759


73


70


84396871

386

Receivables:

Debtors351574

43


144139337

587Gross working capital (A)- Total CurrentAssets

628330151



76

Creditors for Wages

667557

68


4

Provision185713

4

Others293993

32


534

Working Capital Gap

514989

617

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404

Total Working Capital Requirement386242

213

Findings

As per the above analysis the working capital of year 2004-05 is increased by

120080699 because of highly changes in current assets.

In the year 2005-06 the networking capital 177924673which is more than the year

2004-05 because of less stock maintenance in the terms of raw materials and finished

goods.

The year 2006-07 the networking capital is 290541202 which is more than 40% of

increase in the previous two years i.e., 2004-05 & 2005-06

The year 2007-08 the networking capital is increased to 386242213 which is

almost double to the previous years

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SUGGETIONS

In the light of the above conclusion it is proposed to suggest the following for improving the

performance of the Creamline Dairy products limited.

a) Current Assets Management needs to be more efficient on receivable management

and inventory management more attention.

b) In the light of the Current Assets made, it is suggested that the company should raise

its investment in Current Assets. So that it achieves 2:1 current ratio.

c) The average collection period and payment period the company suggested that the

average collection period and payments period generally should not be more than one

and half a month. So it must be decreases the collection periods.

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d) It is desirable that the companys percentage of inventory holding to decreasing trend

providing the company is able to meet the market demand keeping in view of the

fluctuations in demand and availability of raw materials the company is suggested to

improve their efficiency in holding the investors

Chapter VII

CONCLUSION

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CONCLUSION

Here an attempt is made to draw conclusion based on the study of Creamline Dairy

products limited.

The study revealed the following:

The Creamline Dairy products limited.has maintained slight standard Liquidity

Ratios.

The Creamline Dairy products limited Gross Profit Ratio was Satisfactory.

The Creamline Dairy products limited.Net Profit Ratio was Satisfactory

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The Creamline Dairy products limited.Working Capital Turnover Ratio was

Satisfactory.

Over all Creamline Dairy products limited.Financial Performance was Positive.

Chapter-VIII

BIBLIOGRAPHY

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BIBLIOGRAPHY

1. FINANCIAL ACCOUNTING - P.C TULSIAN

2. FINANCIAL MANAGEMENT - PRASANNA CHANDRA

3. FINANCIAL MANAGEMET - M.Y. KHAN & P.K JAIN

4.MANAGEMENT ACCOUNTANCY R.P TRIVEDI & MONOJ TRIVEDI

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5. COST & MANAGEMENT ACCOUNTING S.N MAHESWARI

Website: creamlinedairy.com

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