Summer internship report_Vadilal

  • View
    445

  • Download
    12

Embed Size (px)

Text of Summer internship report_Vadilal

SUMMER INTERNSHIP REPORTTitled

FINANCIAL ANALYSIS OF VADILAL INDUSTRIES LTD

Submitted after 2 months practical training as part of curriculum of PGDM To

Som-Lalit Institute of Management Studies

Prepared by: - GAURAV PRAJAPATI (Roll No:-40)

SUMMER INTERNSHIP REPORT AT VADILAL INDUSTRIES LTD.

Page 1

DECLARATIONThis project report entitled the functional study of WORKING CAPITAL MANAGEMENT and Ratio-Analysis at VADILAL INDUSTRIES LIMITED, Prepared to submit SOM-LALIT INSTITUTE OF MANAGEMENT STUDIES, AHMEDABAD AS THE PART OF PGDM study, has been completed by me under the guidance of Mr. Milin J. Jani, Finance Head and the entire staff member at Vadilal Industries Limited, Ahmedabad.

This project report is entitled an outcome of my an own efforts and it is not submitted either in part or in whole to or copied from any project submitted to any other university or institute for and other degree.

DATE: PLACE:

GAURAV PRAJAPATI (PGDM)

SUMMER INTERNSHIP REPORT AT VADILAL INDUSTRIES LTD.

Page 2

ACKNOWLEDGEMENTKnowledge in itself is a continuous process. At this moment of my substantial enhancement I rarely find enough words to express my gratitude towards those who were constantly involved with me during my project and making it a success. Men become good through practice than by nature.

I am grateful to Prof. Arpita Amarnani, faculty of SOM-LALIT INSTITUTE OF MANAGEMENT STUDIES who created this opportunity to work on the project, i m also thankful to Prof. Roopa Rao and all the faculty member of SOM -LALIT INSTITUTE OF MANAGEMENT STUDIES.

I am highly obliged to Mr. Milin J. Jani, Finance Head at Vadilal Industries limited, for allocating such an interesting and challenging project.

I am grateful to Mr. Ankur Patel (Dy. Finance Manager) at Vadilal Industries Limited, who had guided me throughout the project with their vast knowledge of existing system, inspite of being very busy; he was ready to help me whenever required.

The whole staff of finance department and all staff members of Vadilal Industries Ltd. were highly co-operative and i am thankful for all the support they extended to me. I would also like to thank my parents and all my friends who have helped me, though indirectly, throughout the project duration and always have been a source of encouragement.

DATE: PLACE:

GAURAV PRAJAPATI (PGDM)

SUMMER INTERNSHIP REPORT AT VADILAL INDUSTRIES LTD.

Page 3

PREFACEYesterday is a cancelled check; tomorrow is a promissory note; today is a ready cash, this quote from Hubert Tinley expressed Working Capital Management. Working capital is the excess of Current Assets over Current Liabilities. Decisions relating to working capital and short term financing are referred to as Working Capital Management. These involve managing the relationship between a firms Assets and its short term Liabilities. The goal of Working Capital Management is to ensure that the firm is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short term debt and upcoming operational expenses.

Working capital management is described as involving the administration of Current Assets namely, cash and marketable securities, Receivables and Inventories and administration of Current Liabilities, which includes Account Payables, Bank Loan and other short term sources of finance. Current Assets flow through the firm. Inventory is acquired and subsequently sold for cash or on credit. Accounts Receivables are collected and the cash is used to acquire other income producing assets or to retire debt. The cycle is then repeated as the firm acquires new inventory for sale.

Every entrepreneur would like to imagine himself in a situation where his production process takes very little time to convert the input to the finished product which gets sold immediately in cash the moments it rolls out of the process and the input market is so perfect that any amount of raw material is available at any time at a fixed price. But the entrepreneurs dream is hardly realized. He finds, instead, that his production progress takes quite long time; the finished goods are not sold so quickly which means a quantity of stock remains in the stores. Moreover, the sales are not always in cash- some amount of credit has to be given and the input market is so uncertain that he has to keep a certain amount of safety stock all the time. Each and every current asset of a firm is therefore nothing, but congealed fund for working expenses. And because business is a continuous process, every cycle of operation generates these Current Assets, which need to be funded for immediate financing of working expenses. All organizations have to carry working capital in one form or another. The efficient management of working capital is important from the view of both liquidity and profitability.

SUMMER INTERNSHIP REPORT AT VADILAL INDUSTRIES LTD.

Page 4

TABLE OF CONTENTPARTICULARExecutive Summary Objective of Study Brief Introduction on Ice-cream Market of India Brief Introduction on Vadilal Group of Companies Research Methodology Ratio- Analysis Working Capital Working Capital Management Working Capital Cycle Liquidity Analysis Working Capital Facilities Fund Based Facilities Non-Fund Based Facilities Working Capital Financing Trade Credit Working Capital Financing by Commercial Bank Public Deposit Inter corporate Deposit Form of Bank Finance Guidelines For Bank Finance Conclusion Recommendation Limitation of Study Bibliography Annexure

Pg. No.06 07 09 13 32 36 54 64 66 71 76 77 82 85 85 86 87 88 89 91 96 98 99 100 101

SUMMER INTERNSHIP REPORT AT VADILAL INDUSTRIES LTD.

Page 5

EXECUTIVE SUMMURYFinancial Management decisions are divided into the management of Assets (investments) and Liabilities (sources of financing), in the long-term and the short-term. It is common knowledge that a firm's value cannot be maximized in the long run unless it survives the short run. Firms fail most often because they are unable to meet their working capital needs; consequently, sound working capital management is a requisite for firms survival.

About 60 percent of a financial manager's time is devoted to working capital management, and many of the potential employees in finance-related fields will find out that their first assignment on the job will involve working capital. For these reasons, the project of working capital policy and management given to me at Vadilal Industries Ltd. will help me get the required practical experience on various management practices involved in managing working capital of an organization.

Working capital policy refers to decisions relating to the level of Current Assets and the way they are financed, while Working Capital Management refers to all those decisions and activities a firm undertakes in order to manage efficiently the elements of Current Assets. While Long-Term Financial Analysis primarily concerns strategic planning, working capital management deals with day-to-day operations. By making sure that production lines do not stop due to lack of raw materials, that inventories do not build up because production continues unchanged when sales dip, that customers pay on time and that enough cash is on hand to make payments when they are due. Obviously without good working capital management, no firm can be efficient and profitable.

SUMMER INTERNSHIP REPORT AT VADILAL INDUSTRIES LTD.

Page 6

OBJECTIVES OF THE STUDYThe project on analysis of Working Capital Management and short term financing would be of immense use for a student to manage for the overall understanding of finance department in any organization. Short term financing forms a vital part of corporate financing decisions. For any company, working capital and short term financing has an impact on the profitability and thus the shareholders earnings. The present study is envisaged with the following objectives: Understanding the working capital policy followed at Vadilal industries Ltd. Understanding cash and Liquidity management, Accounts Payable, Accounts Receivables policy followed at Vadilal Industries Ltd. Understanding various components of Working Capital and change in them over time. To determine the type of relationship between various constituents of Current Assets and Working Capital. To assess Liquidity position of Vadilal over the given time period. To understand various avenues used by Vadilal Industries Ltd to finance its Working Capital needs.

SUMMER INTERNSHIP REPORT AT VADILAL INDUSTRIES LTD.

Page 7

1BRIEF INTRODUCTION ON ICECREAM MARKET OF INDIA

SUMMER INTERNSHIP REPORT AT VADILAL INDUSTRIES LTD.

Page 8

ICE-CREAM MARKET IN INDIA India is considered to be the largest milk producer across the globe and accounts for one-fifth of the total global milk production. The ice cream market in India can be divided into: the branded market and the grey market. The branded market at present is 100 million Litters per annum valued at more than Rs. 800 crores. The grey market consists of small local players and cottage industry players. In 2010-11, in the branded ice cream market, Amul held the number one spot, with a market share of 40%, followed by Vadilal at 20%, Kwallity walls at 20%.The ice cream market in India about Rs 3,000 crore and about 60-70% is gone into the organized sector.

The per capita consumption of ice cream in India is approximately 300 ml, as against the world average of 2.3 Litters per annum. The per capita consumption of ice creams in India is just 300 ml per annum, compared to 22 Litters in the US, 18 Litters in Australia, and 14 Litters in Sweden. India is a way too far behind even in terms of the world average p