Working Capital Management

Case Study – Textile spinning

PRESENTED BY :CA – PRADIP MODIMember Advisory Board,PKM ADVISORY SERVICES PVT. LTD.AHMEDABADMOBILE : 9824014310, Phone : +91 79 4006 5204

FINANCING OF AN ENTERPRISE

BUSINESS ACTIVITY – Trading

– Manufacturing – Green Field – Expansion – Diversification

FINANCING PATTERN

Trading – Short Term – Annual basis – Working Capital

Manufacturing – Long Term – 5 to 7 years – Term Loan

Short Term – Annual basis – working capital

Working Capital – Fund Based

Non fund based – letter of credit – guarantee

Term Loan – Rupee Loan

– Foreign Currency – ECB

– Debentures

– Private Equity

SOURCES OF FINANCING

Banks

Financial Institutions

Non Banking Financing Companies

HISTORY OF BANKING IN INDIA

Reserve Bank of India commenced operation from April, 1, 1935.

Through Reserve Bank of India Act, 1934 (II of 1934)

1949 – Enactment of Banking Regulation Act.

RESERVE BANK OF INDIA played a special role in the context of Development

Instrumental in setting up Development Institutions

Setup Institutions to build the financial infrastructure

Deposit Insurance and credit guarantee corporation of India

Unit Trust of India

The Industrial Development Bank of India (IDBI)

The National Bank of Agricultural and Rural Development (NABARD)

The Discount & Finance house of India.

PHASE IGeneral Bank of India – 1786Bank of Bengal – 1809Bank of Bombay – 1840 Established by The East India Company,Bank of Madras – 1843 Merged into imperial bank in 1920.

1865 onwards banks were established exclusively by indians.

PHASE IIBanking Sector ReformsImperial Bank was nationalised in 1955 – State Bank of India was formedSeven Banks forming subsidiaries of State Bank of India were nationalised in 1960.14 Major commercial banks were nationalised on 19th July 1969.

PHASE – III1991– Indian economy opened upLiberalisation of banking practicesContinuing Government control with public participation.

BANKING INDUSTRY

in retrospect. 1)  PRE-NATIONALISATION (private ownership)

Prior to 1969, focus more on individual credibility of borrower rather than huge paper work. Setbacks were largely absorbed by corporate houses who owned them.

2)  POST NATIONALISATION

Pre – supposed social objectives with specific mandate to banks;

i)   To expand branch network – mostly in rural India.

ii)   Flow of credit to rural and SSI sector – Approach at times that banking industry should sacrifice, if required in

achieving social goal (not scientifically defined) – known as Loan Mela.

3)   POST – LIBERALISATION (Precisely 1990 onwards)

  Economy to global competition. Focus shifted to better risk management and improving quality of assets. More transparent system to reflect true financial position of banks.

Systematic efforts initiated first time in 1991 for performance evaluation of the borrower and lenders.

Committee under the Chairmanship of Mr. M. Narsimham –

1) To study prevailing financial system,

2) To identify shortcomings and weakness

3) To prescribe norms to make the disclosure practices more transparent and meaningful.

Report tabled in parliament on 17.12.1991.

RECOMMENDATIONS

PRUDENT ACCOUNTING NORMS FOR INCOME RECOGNITION

To make if more objective based on record and recovery

rather than subjective considerations like availability of

security, net worth of borrower and guarantors (even though,

importance given on security and net worth as banking

system requires).

Prior to Tondon / Chore Committee Recommendations

Through credit authorisation system – centralised

Branch Office – Regional office – Zonal office – Head Office – RBI – CAS

Queries – RBI – Head Office – Zonal Office – Regional Office – Branch office

COMMITTEE RECOMMENDATION – DECENTRALISED

Methodology

Norms of Current assets in major industries

End – use criteria

Maximum Permissible Bank Finance

Emphasis on loan systems

Periodic Information and reporting system

BANKING – WORKING CAPITAL LENDING PROCEDURE

CREDIT MONITORING ARRANGEMENT (CMA)

STRUCTURE PROFITABILITY PROJECTIONS – OPERATING STATEMENT

I) Past two years’ – Audited.

II) Current year – estimated

III) Next year – projected

BALANCE SHEET ANALYSIS

A. I) Current liabilities

a) Bank Borrowing – Working Capital limit.

b) Current liability – payable within one year

c) Total current liabilities – (a) + (b)

ii) Long Term Liabilities – Payable after one year

a) Total outside liabilities

iii) Net worth Equity + Reserves & Surplus.

iv) TOTAL

B. I) Current Assets – Assets realisable within one year

ii) Deferred current assets – more than one year.

iii) Gross Fixed assets – Depreciation = Net fixed assets

iv) TOTAL

The funds which are used to manage day to day business operations

Current Assets – Current Liabilities

CURRENT ASSETS Inventory

- Raw materials

- Work in progress

- Finished goods

- Stores, spares, Packing material Receivables Cash & Bank Balance

CURRENT LIABILITEIS Trade Creditors Expenses – Provisions – Payable within one years

Assessed on an annual basis

Assets conversion cycle through operations

WORKING CAPITAL – DEFINITION

Maximum Permissible Bank Finance (MPBF)

Tondon Committee Recommendations

Method – I Promoters 25% of net working capital

(Current Assets – Current Liabilities)

Method – II Promoters 25% current assets

Method – III 100% of hard core assets + 25% of other current assets

Chore Committee discarded method III and recommended Method II

Method II Known as MPBF

Working Capital Gap Method

ASSESSMENT OF WORKING CAPITAL

Method - I Method - II

1) Current assets 1000 1000

2) Current Liabilities (Excluding bank) 400 400

3) Working Capital gap 600 600

4) Minimum Stipulated - Net working capital 150 250

(25% of No.3) (25% of No.1)

5) Bank finance 450 350

(3-4) (3-4)

FORM – I Particulars of Existing and Proposed Limits

FORM – II Operating Statement

FORM – III Analysis of Balance Sheet

FORM – IV Comparative Statement of Current assets & Current Liabilities

FORM – V Computation of Maximum Permissible Bank Finance (MPBF)

FORM –IV Funds Flow Statement

CMA - DATA

PROJECT APPRAISAL

Till the year 2000

Project Funding was done by Financial Institutions

1) State Financial Corporations.

2) Industrial Development Bank of India (IDBI).

3) Industrial Finance Corporation of India (IFCI)

4) Industrial Credit and Investment Corporation of India (ICICI).

5) Small Industrial Development Bank of India (SIDBI).

Working capital provided by commercial banks.

Funding pattern is changed.

IDBI & ICICI transformed into full fledged banking

Commercial Banks provide both Term Loans and Working Capital.

PROJECT APPRAISALA process to assess various aspects for arriving at a financing decision.

1) Managerial Competence – Resourcefulness, competence and integrity of the management.

2) Technical Feasibility – Appropriate Technology to maintain quality and cost competitiveness. Availability of skilled management team

3) Commercial Feasibility – Detailed market survey – both desk and field survey.

4) Financial Feasibility i) Cost of production & Projected profitability. ii) Balance Sheet and Cash flow statement.iii) Financial ratios – Term Loan Working capital - Short term funds are not diverted to

finance long term assets.- Availability of raw material, power

and labour.

FINANCIAL RATIOS AND PARAMETERS

SHORT TERM VIABILITY

PROFITABILITY Gross profit to sales Net profit to sales Raw Materials to sales Interest to sales Interest Coverage ratio

BALANCE SHEET Current ratio Total Outside Liability to

Tangible net worth Term Liability to Tangible net worth Stock turnover ratio Receivable Turnover ratio

LONG TERM VIABILITY

PROFITABILITY Gross profit to sales Operating profit to sales Net profit to sales Cash accruals DSCR – Debt service coverage ratio Break even Analysis Sensitivity Analysis Internal rate of return

BALANCE SHEET Current ratio TOL to Tangible Net worth Term Liability to Tangible Net worth

Implication of each ratios

1) Current ratios Current assets are sufficient to service current liabilities 1.33:1.

2) TOL to TNW Total outside liabilities against tangible net worth are not out of proportion – Maximum 3 to 4 times

3) DSCR Cash accruals are sufficient to service interest on TermLoan and Term Loan – Minimum 1.75 times

4) Break Even Analysis Capacity utilisation & Turnover at a level where both variable and fixed expenses are absorbed– No profit – No loss.

5) Sensitivity Analysis Profitability level, cash accruals and DSCR

i) At a level when sales price is lower in actual than assumed.

ii) At a level when raw material price is higher in actual than assumed.

iii) At a level when production is lower in actual than assumed.

6) Interest coverage ratio Profit before interest divided by interest.How many times, profit covers interest

7) Stock & receivable How many time stocks and Receivables are routedTurnover ratio against assumed sales

Project ViabilityPROMOTERS’ Point of view

1) Proper use of technology2) Monitoring Cost control

Technical Skilled ManpowerAppropriate process flow-control – Reduce wastagesFinancial discipline – Judicious use of financeInventory control

3) Marketing – Keep check on competition – Domestic / Global

BANKERS – institution point of view

SHORT TERMControl on Receivables – Current assetsNo diversion of working capital for long term assetsProper implementation of process flow chartProduction planning

LONG TERMCash accruals as planned to service debt Proper knowledge on sensitivityBreak – even planning

Day 1st 2nd 3rd 4th 5th 6th 7thProcess Stock 0 110 225 340 455 570 685Overheads 0 5 5 5 5 5 5

0 115 230 345 460 575 690Raw material 100 100 100 100 100 100 100Overhead 10 10 10 10 10 10 10

110 110 110 110 110 110 110Stock in progress 110 225 340 455 570 685 800

Stock in progress 660

Finished goods 140

Control of stock in process

Yarn production cycle – 7 days

Selection of Product Mix

The product mix depends upon various factors.

Promoters’ Competency – experience – Market knowledge

Proper market survey – Marketing network

The selection of Machineries based on proposed product

mix

Whether carded yarn only

carded and combed yarn

Financial Resourcefulness

Technical Manpower

Availability of Raw material

Case Study – Textiles – Spinning

TEXTILE - VALUE CHAIN

Manufacturing Process

Texturizing Blending

Cleaning

Carding

Drawing

Combing

Drawing

Drafting - inter

Spinning

Winding

Man made Filament Man-made Staple fibers Natural Fibers (Cotton) Fiber

Technical Parameters

LENGTH

Staple Classification

Length MM Length Inches Product Mix Count

1) Short Less than 24 15/16-1 Coarse below 20s

2) Medium 24-28 1.1/132-1.3/32 Medium Count 20s – 40s

3) Long 28-34 1.3/32-1.3/8 Fine count 40s – 60 s count

4) Extra long 34-40 1.3/8-1.9/16 Superfine count 80s – 140s

Co-relation between fiber and yarn.

1. Staple length spinning potential

2. Fiber strength Yarn strength, less breakages

3. Fineness Finer spinning potential

4. Maturity Yarn strength and evenness, better dyeing absorbity

5. Trash (non-lint content) Reduce waste

6. Uniformity Ratio Better productivity and evenness

7. Elongations less end breakages

8. Friction cohesiveness

9. Yellowness Yarn appearance

10.Nepiness Yarn nepiness

11. Moisture Content 8.5% moisture content optimum for spinning @ 65%.

  COST OF PROJECT

  SPINNING - 17136 SPINDLES Rs. Lacs

1) Land & Site Development  

 Land is taken on lease - Site development 5.00

2) Buildings  

  Factory Building 545.64

3) Plant & Machineries 1541.01

4)Engineering, Electrification & humidification 164.66

5) Maintenance workshop 9.55

6) Material handling equipments 29.57

7)Misc. Fixed assets, Computers, office equipments 25.00

8) Preliminary expenses 10.00

9) Preoperative expenses @ 3% 68.71

10) Provision for Contingencies @ 3% 68.71

11) Interest during construction 153.20

12) Margin money for working capital 28.95

  TOTAL 2650.00

MEANS OF FINANCE  Equity Share Capital 227.50  Share Premium 455.00  Unsecured Loan 227.50  Term Loan 1740.00  TOTAL 2650.00

  Promoters' Contribution

  D.E.R 

  Assets coverage Ratio

Production Calculation7.22 x rpm TPI = T.M X √CountTPI X Count

4.1 x 4.4722 = 18.335 1) 20s Carded 7.22 x 13500 97470 = 265.803 gms per spindles

shift 18.335 x 20 367

4.1 x 4.899 = 20.086 2) 24s Carded 7.22 x 15000 108300 = 224.659 gms per spindles

shift 20.086 x 24 482

4.1 x 5.477 = 22.456 3) 30s Carded 7.22 x 17000 122740 = 182.193 gms per spindles

shift 22.456 x 30 674

4.1 x 6.324 = 25.931 4) 40s Carded 7.22 x 17000 122740 = 118.333 gms per spindles

shift 25.931 x 40 1037

  Production Production No. of

STAGE per day kgs. per day kgs. Machines

  per machine   require

       

Blow Room 12960 10327 1

Cards 1207 9811 9

Draw Frames      

- Breaker 5112 9781 2 - Finished single delivery 2716 9752 4

Inter 1708 9699 6

NO. OF MACHINES REQUIRED AT EACH STAGE

PRODUCTION AT EACH STAGE – RAW MATERIAL REQUIREMENT

Capacity Utilisation – 97% efficiency 94%

Yarn Production – Ring Frame – 9457 Kgs per day

Yarn Production – Autoconor – 9362 Kgs per day – Final product for sale

Input Output

Kgs. / Day Kgs. / Day

Blow room 10871 10327

Carding 10327 9811

Drawing - 1 9811 9781

Drawing - 2 9781 9752

Inter 9752 9699

Ring Frame 9699 9457

Autoconor 9457 9362

Yield 86.12%

RAW MATERIAL REQUIRED PER DAY 10871 KGS.

Assumptions

 For the year ending

31st March   2012 2013 2014 2015 2016 2017 20181 No of days 165 330 330 330 330 330 3302 No. of Shifts 3 3 3 3 3 3 33 No of Machines

20s Carded 20 5 5 5 5 5 5 524s Carded 24 4 4 4 4 4 4 430s Carded 30 4 4 4 4 4 4 440s Carded 40 4 4 4 4 4 4 4

Total Machines 17 17 17 17 17 17 17

4Spindles per

machine20s Carded 1008 1008 1008 1008 1008 1008 1008 100824s Carded 1008 1008 1008 1008 1008 1008 1008 100830s Carded 1008 1008 1008 1008 1008 1008 1008 100840s Carded 1008 1008 1008 1008 1008 1008 1008 1008

5 Total spindles20s Carded Nos. 5040 5040 5040 5040 5040 5040 504024s Carded Nos. 4032 4032 4032 4032 4032 4032 403230s Carded Nos. 4032 4032 4032 4032 4032 4032 403240s Carded Nos. 4032 4032 4032 4032 4032 4032 4032

Total spindles Nos. 17136 17136 17136 17136 17136 17136 17136

6Capacity

Utilisation 92.00% 95.00% 97.00% 97.00% 97.00% 97.00% 97.00%

7Spindles @ capacity

utilisations 2012 2013 2014 2015 2016 2017 201820s Carded Nos. 4637 4788 4889 4889 4889 4889 488924s Carded Nos. 3709 3830 3911 3911 3911 3911 391130s Carded Nos. 3709 3830 3911 3911 3911 3911 391140s Carded Nos. 3709 3830 3911 3911 3911 3911 3911

Nos. 15765 16279 16622 16622 16622 16622 166228 RPM

20s Carded 13500 13500 13500 13500 13500 13500 1350024s Carded 15000 15000 15000 15000 15000 15000 1500030s Carded 17000 17000 17000 17000 17000 17000 1700040s Carded 17000 17000 17000 17000 17000 17000 17000

9 TM20s Carded 4.10 4.10 4.10 4.10 4.10 4.10 4.1024s Carded 4.10 4.10 4.10 4.10 4.10 4.10 4.1030s Carded 4.10 4.10 4.10 4.10 4.10 4.10 4.1040s Carded 4.10 4.10 4.10 4.10 4.10 4.10 4.10

10 TPI20s Carded 18.336 18.336 18.336 18.336 18.336 18.336 18.33624s Carded 20.086 20.086 20.086 20.086 20.086 20.086 20.08630s Carded 22.457 22.457 22.457 22.457 22.457 22.457 22.45740s Carded 25.931 25.931 25.931 25.931 25.931 25.931 25.931

11 PRODUCTION Gms. / spindle / shift20s Carded Gms 266 266 266 266 266 266 26624s Carded Gms 225 225 225 225 225 225 22530s Carded Gms 182 182 182 182 182 182 18240s Carded Gms 118 118 118 118 118 118 118

12 Efficiency 2012 2013 2014 2015 2016 2017 2018

20s Carded 94% 94% 94% 94% 94% 94% 94%

24s Carded 94% 94% 94% 94% 94% 94% 94%

30s Carded 94% 94% 94% 94% 94% 94% 94%

40s Carded 94% 94% 94% 94% 94% 94% 94%

13 PRODUCTION

Gms. / spindle / shift

20s Carded Gms 250 250 250 250 250 250 250

24s Carded Gms 211 211 211 211 211 211 211

30s Carded Gms 171 171 171 171 171 171 171

40s Carded Gms 111 111 111 111 111 111 111

14 PRODUCTION

Kgs. Per day

20s Carded Kgs. 3475 3589 3664 3664 3664 3664 3664

24s Carded Kgs. 2350 2427 2478 2478 2478 2478 2478

30s Carded Kgs. 1906 1968 2009 2009 2009 2009 2009

40s Carded Kgs. 1238 1278 1305 1305 1305 1305 1305

Kgs. 8969 9262 9457 9457 9457 9457 9457

15 PRODUCTION

20s Carded Kgs. 573447 1184293 1209226 1209226 1209226 1209226 1209226

24s Carded Kgs. 387765 800820 817679 817679 817679 817679 817679

30s Carded Kgs. 314457 649423 663095 663095 663095 663095 663095

40s Carded Kgs. 204246 421813 430693 430693 430693 430693 430693

Kgs. 1479916 3056349 3120693 3120693 3120693 3120693 3120693

16 SELLING PRICE 2012 2013 2014 2015 2016 2017 2018

20s Carded Rs. / Kg. 140.00 140.00 140.00 140.00 140.00 140.00 140.00

24s Carded Rs. / Kg. 150.00 150.00 150.00 150.00 150.00 150.00 150.00

30s Carded Rs. / Kg. 165.00 165.00 165.00 165.00 165.00 165.00 165.00

40s Carded Rs. / Kg. 180.00 180.00 180.00 180.00 180.00 180.00 180.00

17SELLING PRICE

(WASTAGE)

20s Carded Rs. / Kg. 30.00 30.00 30.00 30.00 30.00 30.00 30.00

24s Carded Rs. / Kg. 35.00 35.00 35.00 35.00 35.00 35.00 35.00

30s Carded Rs. / Kg. 40.00 40.00 40.00 40.00 40.00 40.00 40.00

40s Carded Rs. / Kg. 45.00 45.00 45.00 45.00 45.00 45.00 45.00

18 WASTAGE

20s Carded

Yield 86.12% 573447 1184293 1209226 1209226 1209226 1209226 1209226

Invisible loss 1.00% 6659 13751 14041 14041 14041 14041 14041

Saleable waste 12.88% 85744 177081 180809 180809 180809 180809 180809

100.00% 665850 1375125 1404075 1404075 1404075 1404075 1404075

24s Carded

Yield 86.12% 387765 800820 817679 817679 817679 817679 817679

Invisible loss 1.00% 4502 9299 9494 9494 9494 9494 9494

Saleable waste 12.88% 57980 119742 122263 122263 122263 122263 122263

100.00% 450248 929861 949437 949437 949437 949437 949437

30s Carded

Yield 86.12% 314457 649423 663095 663095 663095 663095 663095

Invisible loss 1.00% 3651 7541 7699 7699 7699 7699 7699

Saleable waste 12.88% 47019 97104 99149 99149 99149 99149 99149

100.00% 365128 754068 769943 769943 769943 769943 769943

40s Carded 2012 2013 2014 2015 2016 2017 2018Yield 86.12% 204246 421813 430693 430693 430693 430693 430693Invisible loss 1.00% 2372 4898 5001 5001 5001 5001 5001Saleable waste 12.88% 30540 63071 64399 64399 64399 64399 64399

100.00% 237157 489782 500093 500093 500093 500093 500093

Raw Material requirement

20s Carded Kgs. 665850 1375125 1404075 1404075 1404075 1404075 140407524s Carded Kgs. 450248 929861 949437 949437 949437 949437 94943730s Carded Kgs. 365128 754068 769943 769943 769943 769943 76994340s Carded Kgs. 237157 489782 500093 500093 500093 500093 500093

Kgs. 1718383 3548835 3623548 3623548 3623548 3623548 362354819 RAW MATERIAL

COTTON FOR

20s Carded (Rs./ Kgs.) 77.25 77.25 77.25 77.25 77.25 77.25 77.25

24s Carded (Rs./ Kgs.) 77.25 77.25 77.25 77.25 77.25 77.25 77.25

30s Carded (Rs./ Kgs.) 90.00 90.00 90.00 90.00 90.00 90.00 90.00

40s Carded (Rs./ Kgs.) 90.00 90.00 90.00 90.00 90.00 90.00 90.00

20 Power 1666 1666 1666 1666 1666 1666 1666 1666

1666 x 96% x 76% x 24 x days x Capacity units 4428359 9145524 9338062 9338062 9338062 9338062 9338062

4.80 4.80 4.80 4.80 4.80 4.80 4.80212.56 438.99 448.23 448.23 448.23 448.23 448.23

2012 2013 2014 2015 2016 2017 201821 Stores & Spares % of sales 1.00% 1.00% 1.00% 1.00% 1.00% 1.00% 1.00%22 Other manufacturing exps. % of sales 2.00% 2.00% 2.00% 2.00% 2.00% 2.00% 2.00%23 Administrative expensive % of sales 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%24 Marketing expenses % of sales 1.50% 1.50% 1.50% 1.50% 1.50% 1.50% 1.50%

25 Repairs & Maintenance

- Building % of bldg. 0.53% 0.53% 0.53% 0.53% 0.53% 0.53% 0.53%

- Plant & Machineries % of P&M. 1.03% 1.03% 1.03% 1.03% 1.03% 1.03% 1.03%

26 Interest on term Loan 11.50%

Interest on Working Capital 12.50%

27 Spinning

Stock in process days 7 7 7 7 7 7 7

Finished goods days 25 25 25 25 25 25 25

28 Current Assets

Raw Material days 50 60 60 60 60 60 60

Stores & Spares Stock days 25 25 25 25 25 25 25

Receivables 26 40 40 40 40 40 40

Other Current assets 5% 10% 10% 10% 10% 10% 10%

29 Current Liabilities

Trade Creditors days 7 10 10 10 10 10 10

Other Current liabilities Of stores 3.00% 3.00% 3.00% 3.00% 3.00% 3.00% 3.00%

CMA DATA - FORM II

OPERATING STATEMENT2012 2013 2014 2015 2016 2017 2018

Days 165 330 330 330 330 330 330

(Rs. Lacs)

Sales 1909 4838 4945 4955 4955 4955 4955

Raw materials 1404 2900 2961 2961 2961 2961 2961

Direct expenses 337 719 735 738 742 746 750

Stock Adjustments -375 -15 -8 0 0 0 0

1366 3604 3688 3699 3703 3707 3711

Depreciation 112 225 225 225 225 225 225

Total 1478 3829 3913 3924 3928 3932 3936

Gross profit 431 1009 1032 1031 1027 1023 1019

Indirect exps. 55 140 143 144 144 144 144

Profit before tax 376 869 889 887 883 879 875

Interest 150 296 274 234 194 154 118

Operating profit 226 573 615 653 689 725 757

Misc. Exps. W/off. 1 1 1 1 1 1 1

Taxes 52 154 184 210 233 255 275

Net profit 173 418 430 442 455 469 481

Cash accruals 286 644 656 668 681 695 707

CMA DATA - FORM III

ANALYSIS OF BALANCE SHEET2012 2013 2014 2015 2016 2017 2018

CURRENT LIABILITIES (Rs. Lacs)

Bank Borrowing for W.C

- From Existing ban 800 800 900 900 900 900 900

- From other banks - - - - - - -

Sub-total 800 800 900 900 900 900 900

Trade Creditors 60 88 90 90 90 90 90

Installments falling due within on year 174 348 348 348 348 174 0

Other 2 3 3 3 3 3 3

Sub-total 236 439 441 441 441 267 93

TOTAL CURRENT LIABILIITES 1036 1239 1341 1341 1341 1167 993

TERM LIABILITIES

Term Loans

Installments for more than one year 1566 1218 870 522 174 0 0

TOTAL OUTSIDE LIABILITIES 2602 2457 2211 1863 1515 1167 993

NET WORTH

Equity with premium 683 683 683 683 683 683 683

General reserves 172 590 1020 1462 1916 2384 2865

Unsecured loans from promoters 227 227 227 227 227 227 227

Sub-total 1082 1500 1930 2372 2826 3294 3775

TOTAL LIABILITIES 3684 3957 4141 4235 4341 4461 4768

CMA DATA - FORM IIIANALYSIS OF BALANCE SHEET

2012 2013 2014 2015 2016 2017 2018CURRENT ASSETSCash and Bank Balance 35 38 413 731 1063 1409 1942Fixed Deposits with bank - Margin

Money -- - - - - - -Receivables 283 567 580 580 581 581 581Sub-totalINVENTORIESRaw Material 426 527 538 538 538 538 538

Work-in-progress 78 82 83 83 83 83 83Finished goods 297 309 316 317 317 317 318Others 3 4 4 4 4 4 4Sub-total 804 922 941 942 942 942 943Advances 54 149 152 152 152 152 152TOTAL CURRENT ASSETS 1176 1676 2086 2405 2738 3084 3618Gross Block 112 337 562 787 1012 1237 1462Less : Depreciation 2499 2274 2049 1824 1599 1374 1149NET BLOCKOther Non-current assets 9 8 6 5 4 3 1Preliminary exps. Not W/off 3684 3958 4141 4234 4341 4461 4768TOTAL ASSETSCurrent RatioTOL / TNWTL/TNW

COMPARATIVE STATEMENT OF

CURRENT ASSETS & CURRENT LIABILITIESFORM - IV

  2012 2013 2014 2015 2016 2017 2018

  A: CURRENT ASSETS      

1 Raw material      

a) Imported 0 0 0 0 0 0 0

b) Indigenous 426 527 538 538 538 538 538

2) Stores 0 0 0 0 0 0 0

a) Imported 0 0 0 0 0 0 0

b) Indigenous 3 4 4 4 4 4 4

3 Stock in process 79 82 83 83 83 83 83

4 Finished Goods 297 309 316 317 317 317 318

5 Receivables 283 567 579 580 580 580 580

6 Export receivables 0 0 0 0 0 0 0

7 Advances To Suppliers of Goods 0 0 0 0 0 0 0

8 Other current assets incl. Cash & bank 90 187 565 883 1215 1561 2094

6 TOTAL CURRENT ASSETS 1176 1676 2086 2406 2738 3085 3618

COMPARATIVE STATEMENT OFCURRENT ASSETS & CURRENT LIABILITIES

FORM IV

B. CURRENT LIABILITIES 2012 2013 2014 2015 2016 2017 2018

7 Creditors 60 88 90 90 90 90 90

8 Advances From Customers 0 0 0 0 0 0 0

9 Statutory Liabilities (hire purchase) 0 0 0 0 0 0 0

10 Other Current Liabilities        

I)Interest on term loan of GIIC – deferred 0 0 0 0 0 0 0

ii)Installments payable within one year 174 348 348 348 348 174 0

iii) Dividend Payables 0 0 0 0 0 0 0

iv) Installments of Term Loans, DPG 0 0 0 0 0 0 0

  Public Deposits, debentures etc        

v) Other liabilities 2 3 3 3 3 3 3

11 TOTAL CURRENT LIABILITIES 235 439 440 440 440 266 92

COMPUTATION OF MAXIMUM PERMISSIBLEBANK FINANCE FOR WORKING CAPITAL

FORM V

  2012 2013 2014 2015 2016 2017 2018

1 Total Current Assets (9 in Form IV) 1176 1676 2086 2406 2738 3085 3618

2Other Current Liabilities (other than Bank Borrowings) 235 439 440 440 440 266 92

3 Working Capital Gap(WCG) (1-2) 941 1237 1646 1965 2298 2818 3525

4 Minimum Stipulated Net Working capital 0 419 521 601 685 771 904

5 Actual Project Net Working capital 141 437 746 1065 1398 1918 2625

  (45 in Form-III)              

6 Item 3 Minus Items4 941 818 1124 1364 1613 2047 2621

7 Item 3 Minus Items5 800 800 900 900 900 900 900

8 Maximum Permissible Bank Finance 800 800 900 900 900 900 900

  (Item 6 or 7 Whichever is Lower) 800 800 900 900 900 900 900

9

Excess Borrowings representing Short fall in net working capital (4-5)

             

FUNDS FLOW STATEMENT - FORM VI  2012 2013 2014 2015 2016 2017 2018

1 SOURCES    a) Net Profit After Tax 172 418 430 441 454 468 481b) Depreciation 112 225 225 225 225 225 225c) Increase in capital 683 0 0 0 0 0 0d) Increase in Term Liabilities 1566 0 0 0 0 0 0  increase in unsecured loans 228 0 0 0 0 0 0

f) Decrease in:  I) Fixed Assets 0 0 0 0 0 0 0g) Others (P & P Written Off) 1 1 1 1 1 1 1h) TOTAL 2762 644 656 668 680 695 707

2 USES  a) Decrease in Term Liabilities 0 348 348 348 348 174 0

b) Increase in:  I) Fixed Assets 2611 0 0 0 0 0 0ii) Other non Current Assets - P & P 10 0 0 0 0 0 0  Normal Capital Expenditure 0 0 0 0 0 0 0

iii) Deferred receivables 0 0 0 0 0 0 0c) Dividend payment 0 0 0 0 0 0 0d) Others - Decrease in Creditors for P&M 0 0 0 0 0 0 0e) Total 2621 348 348 348 348 174 03 Long Term Surplus(=)Deficit(-)1-2 141 296 308 320 332 521 707

4Increase/Decrease in Current Assets 1176 496 36 2 0 0 0

5 Increase/Decrease in Current 235 -203 -2 0 0 174 174

 Liabilities other than Bank Borrowing  

6Increase/Decrease in working capital gap 941 296 408 320 332 521 707

7 Net Surplus(=) Deficit(-) -800 0 -100 0 0 0 0

  (Difference of 3 &6)              

8Increase/Decrease in Bank Borrowing 800 0 100 0 0 0 0

 INCREASE/DECREASE IN NET SALES 1909 2929 107 10 0 0 0

BREAK EVEN ANALYSIS    2012 2013 2014 2015 2016 2017 2018Production Kgs. 1479916 3056349 3120693 3120693 3120693 3120693 3120693

Sales (Net of stock) 2284.55 4853.43 4953.53 4954.86 4954.82 4954.83 4954.84VARIABLE EXPENSESRaw Material & Packing

Mat. 100% 1404.24 2900.07 2961.12 2961.12 2961.12 2961.12 2961.12Power & fuel 90% 191.31 395.09 403.40 403.40 403.40 403.40 403.40Wages 90% 52.21 104.42 107.56 110.78 114.11 117.53 121.05Stores and Spares 100% 18.31 46.76 47.79 47.89 47.89 47.89 47.89Mfg. Exps. 90% 32.95 84.16 86.03 86.20 86.20 86.20 86.20Selling Exps. 100% 27.46 70.14 71.69 71.83 71.83 71.83 71.83Interest on working Capital 100% 50.00 100.00 112.50 112.50 112.50 112.50 112.50

Total Variable Expenses 1776.47 3700.63 3790.09 3793.72 3797.05 3800.47 3804.00

CONTRIBUTION 508.08 1152.80 1163.44 1161.14 1157.77 1154.36 1150.85

% of sales 22.24% 23.75% 23.49% 23.43% 23.37% 23.30% 23.23%FIXED EXPENSESPower 10% 21.26 43.90 44.82 44.82 44.82 44.82 44.82Wages 10% 5.80 11.60 11.95 12.31 12.68 13.06 13.45Mfg. Expenses 10% 3.66 9.35 9.56 9.58 9.58 9.58 9.58Administrative exps 100% 27.46 70.14 71.69 71.83 71.83 71.83 71.83Depreciation 100% 112.48 224.97 224.97 224.97 224.97 224.97 224.97Interest on term loan 100% 100.05 195.93 161.75 121.73 81.71 41.69 5.84

Total Fixed Expenses 270.71 555.89 524.74 485.24 445.59 405.95 370.49BREAK EVEN POINT

Production (kg.) 788519 1473794 1407500 1304135 1201047 1097436 1004634

Sales (Rs. lacs) 1217.24 2340.36 2234.15 2070.63 1906.94 1742.44 1595.09

Capacity Utilisation 49.02% 45.81% 43.75% 40.54% 37.33% 34.11% 31.23%CASH BREAK EVEN

Production (kg.) 460878 877347 804067 699504 594660 489256 394596

Sales (Rs. Lacs) 711.46 1393.21 1276.31 1110.63 944.16 776.81 626.52Capacity Utilisation   28.65% 27.27% 24.99% 21.74% 18.48% 15.21% 12.27%

SENSITIVITY ANALYSISIf sale price is reduced by 5%

  2012 2013 2014 2015 2016 2017 2018Sales 2284.55 4853.43 4953.53 4954.86 4954.82 4954.83 4954.84

Less : 5% 114.23 242.67 247.68 247.74 247.74 247.74 247.74

Revised sales 2170.32 4610.76 4705.85 4707.12 4707.08 4707.09 4707.10Reduced by 114.23 242.67 247.68 247.74 247.74 247.74 247.74

Net profit before tax 224.42 572.27 614.06 651.26 687.54 723.77 755.72

Revised Net profit before tax 110.19 329.60 366.38 403.51 439.80 476.03 507.97Less : Tax @ 33.33% 36.74 109.89 122.15 134.53 146.63 158.71 169.36

Profit after Tax 73.46 219.71 244.23 268.98 293.17 317.32 338.62

Add back :  

Interest on term loan 100.05 195.93 161.75 121.73 81.71 41.69 5.84Depreciation 112.48 224.97 224.97 224.97 224.97 224.97 224.97Preliminary Expenses 1.25 1.25 1.25 1.25 1.25 1.25 1.25

Net cash accruals 287.24 641.86 632.20 616.93 601.10 585.23 570.67

   

Repayment obligation  

Interest 100.05 195.93 161.75 121.73 81.71 41.69 5.84Principal 0.00 174.00 348.00 348.00 348.00 348.00 174.00

Total Repayment 100.05 369.93 509.75 469.73 429.71 389.69 179.84

D.S.C.R 2.87 1.74 1.24 1.31 1.40 1.50 3.17

Average D.S.C.R 1.61 times  

Taxable profit 224.42 572.27 614.06 651.26 687.54 723.77 755.72Reduced by 114.23 242.67 247.68 247.74 247.74 247.74 247.74

  110.19 329.60 366.38 403.51 439.80 476.03 507.97  110.19 329.60 366.38 403.51 439.80 476.03 507.97

Taxes @ 33.33% 36.74 109.89 122.15 134.53 146.63 158.71 169.36

SENSITIVITY ANALYSISIf raw material price is increased by 5%

  2012 2013 2014 2015 2016 2017 2018Raw material 1404.24 2900.07 2961.12 2961.12 2961.12 2961.12 2961.12Add : Increase by 5% 70.21 145.00 148.06 148.06 148.06 148.06 148.06Increased cost of Raw material 1474.45 3045.07 3109.18 3109.18 3109.18 3109.18 3109.18Increase by 70.21 145.00 148.06 148.06 148.06 148.06 148.06Net profit before tax 224.42 572.27 614.06 651.26 687.54 723.77 755.72Revised Net profit before tax 154.21 427.27 466.00 503.20 539.49 575.71 607.66Taxes @ 33.34% 51.41 142.45 155.37 167.77 179.87 191.94 202.59Profit after Tax 102.80 284.82 310.64 335.43 359.62 383.77 405.07

Add back :  Interest on term loan 100.05 195.93 161.75 121.73 81.71 41.69 5.84Depreciation 112.48 224.97 224.97 224.97 224.97 224.97 224.97Preliminary exps. written off 1.25 1.25 1.25 1.25 1.25 1.25 1.25  316.58 706.97 698.61 683.38 667.55 651.68 637.12

Repayment obligation  

Interest 100.05 195.93 161.75 121.73 81.71 41.69 5.84Principal 0.00 174.00 348.00 348.00 348.00 348.00 174.00Total Repayment 100.05 369.93 509.75 469.73 429.71 389.69 179.84D.S.C.R 3.16 1.91 1.37 1.45 1.55 1.67 3.54

Average D.S.C.R 1.78times  Taxable profit 224.42 572.27 614.06 651.26 687.54 723.77 755.72Reduced by 70.21 145.00 148.06 148.06 148.06 148.06 148.06  154.21 427.27 466.00 503.20 539.49 575.71 607.66  154.21 427.27 466.00 503.20 539.49 575.71 607.66Taxes @ 33.34% 51.41 142.45 155.37 167.77 179.87 191.94 202.59

KEY FINANCIAL PARAMETERSFor the year ending 31st March 2012 2013 2014 2015 2016 2017 2018Gross profit to sales 21.37% 22.55% 22.50% 22.44% 22.36% 22.28% 22.21%Operating profit to sales 9.82% 11.79% 12.40% 13.14% 13.88% 14.61% 15.25%Net profit to sales 7.54% 8.61% 8.68% 8.91% 9.16% 9.45% 9.71%Interest to sales 6.57% 6.10% 5.54% 4.73% 3.92% 3.11% 2.39%Raw material to sales 61.47% 59.75% 59.78% 59.76% 59.76% 59.76% 59.76%Current Ratio 1.37 1.88 2.10 2.42 2.76 3.11 3.65Debt Equity Ratio 1.61 1.04 0.63 0.37 0.18 0.05 0.00TOL /TNW 2.42 1.65 1.15 0.79 0.54 0.35 0.26

DSCR (Normal) 3.86 2.27 1.61 1.68 1.77 1.89 3.96   DSCR (Normal) Maximum 3.96  Minimum 1.61  Average 2.06 times     IRR-PROJECT (15 years)  Post tax 33.20%  Pre tax 44.72%  Sensitivity analysis - D.S.C.R  Sales price reduced by 5% 2.87 1.74 1.24 1.31 1.40 1.50 3.17Average 1.61 times     Raw material cost inc by 5% 3.16 1.91 1.37 1.45 1.55 1.67 3.54Average 1.78 times  Break Even Analysis  Production (Kgs.) 788519 1473794 1407500 1304135 1201047 1097436 1004634Sales (Rs. Lacs) 1217 2340 2234 2071 1907 1742 1595Capacity Utilisation 49.02% 45.81% 43.75% 40.54% 37.33% 34.11% 31.23%   Cash Break Even Analysis  Production (Kgs.) 460878 877347 804067 699504 594660 489256 394596Sales (Rs. Lacs) 711 1393 1276 1111 944 777 627Capacity Utilisation 28.65% 27.27% 24.99% 21.74% 18.48% 15.21% 12.27%

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