Working Capital Financing Project

SUBMITTED TO: SUBMITTED BY:

Dr. A.K. SINHA GROUP-3

Professor Finance & Dean ANKITA GOYAL

HITESH NANDWANA

SUNIK K GUPTA

PIYUSH SINGH

MONIKA PATHAK

SAURABH SHRIVASTAVA

INDEX

S.No. Particulars

1. Executive Summary

2. Project Methodology

3. Findings

4. Conclusion

5. Bibliography

6. Appendix

7. Questionnaire

Executive summary

OBJECTIVE OF STUDY

We have been given this topic because of following reason:

1. To know how the working is done in the real world.2. To get the practical exposure.3. To make contact with the corporate people.4. What are the sources of working capital finance in the company?5. To know whether there is any difference between company working and

book standards

LIMITATION OF THE STUDY

1. It was very difficult to get the appointment from the company.2. Confidential information they do not want to share.

RESEARCH METHODOLOGY

Data is the information that forms the basis of analysis, interpretation, findings. In this project we have collected the data by QUESTIONNAIRE.

FINDINGS

1. They have a stock cycle of 60 days.

2. They finance their working capital through banks.

CONCLUSION

We conclude that it was good experience for us. We gained such a vast practical knowledge in this project work. This project helps us to gain knowledge about the practical scenario, how the work is being done in the companies. We are able to make contact with the corporate people and this was a great opportunity for us.

PROJECT METHODOLOGY

METHOD OF DATA COLLECTION

Data is the information that forms the basis of analysis, interpretation, findings. In this project we have collected the data by-

QUESTIONNAIRE (PRIMARY DATA)

A questionnaire is a research instrument consisting of a series of questions and other prompts for the purpose of gathering information from respondents. They are cheap, do not require as much effort from the questioner as verbal or telephone surveys, and often have standardized answers that make it simple to compile data. However, such standardized answers may frustrate users. Questionnaires are also sharply limited by the fact that respondents must be able to read the questions and respond to them. Thus, for some demographic groups conducting a survey by questionnaire may not be practical.

OBJECTIVE OF STUDY1. To know the real scenario of the industry.2. To get the industrial exposure. 3. To know whether the financing policy are effective or not.4. How do they finance their organizational activities ?

SCOPE OF STUDY

Finance is the key for success of any business as it helps in capital formation etc. So we have taken the data from the KEC LTD (RPG GROUP) regarding their working capital financing. We visited to the company in gurgaon. The title to this project “WORKING CAPITAL FINANCING”

LIMITATION OF THE STUDY

1. It’s a challenge to enter into the company premises (appointment).2. They hesitate to disclose their internal information.3. Many respondents gave false information.4. Time is the biggest constraint here because managers were not having the

time to fill the questionnaire.5. To find out the network in a company in order to get information..

GEOGRAPHICAL SCOPE

This project is having wide geographical scope. We cover the company to collect the data for the project report ( gurgaon)

CONCLUSIONWe conclude that it was good experience for us. We gained such a vast practical knowledge in this project work. This project helps us to gain knowledge about the practical scenario.

FINDINGS

Q. How do you control your working capital/ processing time?

A. By way of optimization of working capital cycle and maximizing credit to creditors and minimizing credit of customers by best utilization of resources and minimizing stock level.

Q. How do you arrange for additional working capital?

A. By taking credit facility for a temporary period i.e. adhoc facility, seasonal facility etc.

Q. Do you get the higher level sanction?

A. If require we get it but depend on authority and powers for example; branch manager of a bank has a sanction power up to 5 crores only, beyond that higher level sanctions are required.

Q. How do estimate your working capital? Is it based on your operating cycle, if yes what is the duration of operating cycle?

A. Yes, we have a stock cycle of 60 days, dispatch cycle of 30 days, customer credit of 45 days.

Q. How you finance your working capital requirement?

A. By means of capital deployment by management credit facility from banks/financial institutions.

Q. Does your demand vary as per season? If yes how you arrange for the additional demand?

A. By taking credit facility for a temporary period i.e. adhoc facility, seasonal facility etc.

Q. Do you get credit facility from your supplier?

A. Yes, 45 days but depend on customer, price and product.

Q. Do you give credit facility to your customer?

A. Yes, we give credit of 30 days normally.

Q. How you control your working capital requirement?

A. Yes, by more realization of funds and better negotiations with customers and suppliers and also maintaining optimum level of stock.

Q. Do you use banking source to finance your working capital?

How convenient it is? What is the problem in it? And what are the other sources of finance?

A. Yes. Very convenient. If there is low utilization means low interest. Other sources of finance other than banks are financial institutions of the central and state government.

Q. What is your overall opinion?

A. It is a fundamental need of business and successful business should have efficiency to operate the working capital limits keeping in view of better resources availability, minimizing cost, maximizing production with optimum level of stock. Also good availability of creditability among customers and suppliers.

CONCLUSIONThis report comes out with some conclusion. These are:

Controlling working capital requirement is done by the company by way of optimization of working capital cycle and maximizing credit to creditors and minimizing credit of customers by best utilization of resources and minimizing stock level as explained by theory.

Companies arrange for their additional working capital through by taking credit facility for a temporary period i.e. adhoc facility, seasonal facility etc as rightly explained through theory.

Companies get higher level sanction, if require we get it but depend on authority, power and credit worthiness of the company while in theory only the credit worthiness aspect is mentioned.

Operating cycle time normally differ from company to company it depends on nature of company as rightly mentioned in theory.

Normally, company get its working capital finance through banks as mentioned in theory.

Company point of view (credit facility given to customers): they provide credit of 30 days to their customer.

Book point of view: credit period refers to the length of time customers are allowed to pay for their purchase. It generally varies from 15 days to 60 days .some times discount is induced to get early payments. More the lengthening of the credit will push up the sales.

In India very few companies have attempted a systematic articulation and formalization of their credit policy generally credit policy emerged as unstated conventions.

Companies’ point of view (credit facility given by supplier): supplier provides credit of 45 days but depend on price, product, and customer.

Book point of view: confidence of the supplier is the key to get trade credit. Things which supplier considers are earning record over the period of time, liquidity position of the firm, and record of payment .supplier inducing discount to get payment early. Their are cost associated with trade credit which depend on the terms of credit offered by the supplier. After analyzing we can notice that company is receiving cash within days and making payments within 45 days so it looks to be balanced.

Company point of view (how do they control their working capital requirement): by more realization of funds and better negotiations with customers and suppliers and also maintaining optimum level of stock.

Books point of view: customers won't pay on time; suppliers won't deliver until bills are paid; spare capital is tied up in work in progress. It's a situation that can bring a business to its knee, how sales forecasts and regular meetings can help control working capital.

Key points to control the working capital:

-Understanding the importance of cash flow. -How to release capital within a business.

-sales forecasting (it helps in determining the level of stock and it also determines the demand) and regular meetings of all people responsible for keeping down the level of working capital.

Company point of view (use of banking source of finance and other sources): Yes Very conveniently they use the banking source to finance working capital. If there is low utilization means low interest. Other sources of finance other than banks are financial institutions of the central and state government.

Book point of view: most of the firms go for the banking sources to finance their working capital; other sources are financial institution, investors, lenders etc

Overall opinion It is a fundamental need of business and successful business should have efficiency to operate the working capital limits keeping in view of better resources availability, minimizing cost, maximizing production with optimum level of stock. Also good availability of creditability among customers and suppliers.

BIBLIOGAPHY

1. www.kecrpg.com

2. www.google.com 3. RPG Boucher4. Financial Management- Prasanna Chandra5. Financial Management- M. Y. Khan & P.K. Jain

APPENDIX

About the company

KEC International is One of the largest Power Transmission EPC companies in the world. KEC has made an indelible mark on the world map by constantly and consistently re-engineering itself to retain its position of leadership in the areas of quality, technology, capacity and capability.

KEC's strengths lie in the areas of Design, Manufacture, supply and Construction of Turnkey Projects of Power Transmission lines of voltages up to 800 KV and in the execution of Railway Electrification projects, setting up Sub-stations and

power Distribution Networks, Optical Fiber Cable (OPGW) installations, Turnkey Telecom Infrastructure Services and maintenance of Power Transmission Lines. 

To ensure reliable service KEC is supported by multi-location manufacturing facilities and a workforce spread out over 20 countries.

At KEC manpower is one of the most important resources. KEC employees participate in regular training programmes and seminars in various areas of self development. Every employee is instilled with a sense of pride of his work and workplace & strives to make KEC the International market leader in the power transmission sector. 

KEC has gone from strength to strength successfully exporting towers to over 20 countries and widening its client base across the world. The company has an increasingly strong presence in the Middle East, the Pacific Rim countries and Africa.

KEC has helped transmit power to various countries that include Argentina, Brazil, Canada, Egypt, Ethiopia, Ghana, India, Indonesia, Iran, Iraq, Kenya, Kuwait, Lebanon, Malaysia, New Zealand, Nepal, Nigeria, Philippines, South Africa, Sri Lanka, Saudi Arabia, Sudan, Syria, Thailand, Tunisia, USA, UAE and Vietnam.

The KEC credo is that no project is complete till the customer is totally satisfied. KEC has successfully executed contracts from 33 KV to 800 KV in India and abroad.

RPG GROUP

Respond. Perform. Grow. These are the pillars on which RPG has built its foundations to become one of the largest business houses of India with a turnover of over US $2.1 billion and assets of over US $2.5 billion. Today the Group companies have worldwide presence and partnerships with many of the transnational corporate.

A truly global organization, RPG Enterprises spans a spectrum of business across industries.

BUSINESS SEGMENTBUSINESS SEGMENT COMPANIES

Transmission KEC International Ltd.Substations - KEC Power India Pvt. Ltd.(KPIL)New!RPG Cables.

Power CESC Ltd. Noida Power Company

Tyres CEATCEAT Kelani Philips Carbon BlackHarrison Malayalam

Retail Spencer's HypermarketMusic WorldSpencers

Entertainment SaregamaHamaraCD

Technology ZensarRPG Life SciencesRaychem RPG

GenesisRPG Enterprises is one of India’s largest business conglomerates with a turnover close to US$ 3 billion. Since its inspection in 1979, RPG Enterprises has been one of the fastest growing groups in India with more than 15 companies operating successfully in 6 business sectors: Power, Tyres, Transmission, Technology, Retail and Entertainment.

CULTURE

They have a strong corporate culture that has chiseled RPG Enterprises to emerge as one of the most respected groups in the industry.

VISIONTo be a global leader in the Power Transmission EPC business and a significant player in other related businesses, providing superior value to all stakeholders.

KEC advantageCommencing operations in 1945 as kamani Engineering Corporation, KEC International is a world leader in the T&D EPC space. KEC’s intellectual pool delivers value to its clients. Today, the name KEC International is acknowledged to be synonymous with excellence.

Current projects*International

Capacity (KV) Type Country Length (Kms.)

110/220 DC Afghanistan 753

22 RE Afghanistan - Distribution 611

400 SC Algeria - Hot Line Stringing 3000

400 SC Algeria - T/L 337

275 DC Australia Tower Supply

500 DC Egypt 196

132 SC Ethiopia 50

15/33 RE Ethiopia - Distribution 5941

230/400 SC Ethiopia - T/L 477

330 SC Ghana 215

33/132 SC/DC Iraq ( Kurdistan ) 4628

500 SC Kazakhstan 725

11/33 SC Kenya 744

132 Kenya 25

220 DC Lebanon 187

400 SC/DC Libya 733

350 HVDC Namibia 306

132/330 SC/DC Nigeria 401

132/220 DC Oman 65

380 D/C OHL Saudi Arabia 123

380 D/C OHL Saudi Arabia 55

380 DC Saudi Arabia 268

765 SC South Africa 114(Supply)

400 S/C South Africa Supply

220 DC Tajikistan 118

90/150/220 SC/DC Tunisia 558

200/220/400 DC UAE ( Abu Dhabi ) 135

132 DC UAE ( Sharjah ) 76

*Domestic

Capacity (KV) Type Location/ Line Length (Kms.)

765 SC Pichor - Malanpur 112

400 DC Agra-Jaipur 110

400 DC Hatta - Bina and LILO lines at Bina & Rajgarh 167

400 DC Seoni - Khandwa 117

400 DC Jhalod - Dehgam 167

400 DC Biharsharif - Hasanpur 58

400 SC Partabpur - Korba 149

400 DC Kahalgaon - Lakhisarai 124

400 DC Teesta - V - Darjeeling 51

400 SC RAPP - 5 & 6 - Kota 62

165 SC & DC Bareilly - Moradabad T/L and 4 Nos of LILO Lines 165

Questionnaire

Q. How do you control your working capital/ processing time?

Q. How do you arrange for additional working capital?

Q. Do you get the higher level sanction?

Q. How do estimate your working capital? Is it based on your operating cycle, if yes what is the duration of operating cycle?

Q. How you finance your working capital requirement?

Q. Does your demand vary as per season? If yes how you arrange for the additional demand?

Q. Do you get credit facility from your supplier?

Q. Do you give credit facility to your customer?

Q. How you control your working capital requirement?

Q. Do you use banking source to finance your working capital?

How convenient it is? What is the problem in it? And what are the other sources of finance?

Q. What is your overall opinion?