Analysis of Working Capital of Dabur India

Analysis of Working Capital of Dabur India
Working capital management is one of the most critical responsibilities of company management.
Every institution, whether public or private, profit-oriented or not, regardless of size or sort of
operation, need appropriate working capital. Working capital management is the most important
aspect in any corporate organization's existence, liquidity, solvency, and profitability. Because
working capital is defined as current assets minus current liabilities, the quality of current assets,
particularly the number of debtors and inventory, is a significant component in determining working
capital. Working capital gains importance as it is directly related to the corporate's liquidity position.
However, in some circumstances, current assets are lower than current liabilities (known as negative
current assets).
Annual Working capital analysis done for 5 years
(Dabur India )
Working Capital of the company increased marginally from 18.1 days in fiscal 2021–2022 to 21.7 days
in fiscal 2022–2023 (Table 1). This was mostly due to an increase in receivable days from 21.7 in fiscal
2021–22 to 26.9 in fiscal 2022–23. The number of inventory days was identical at 64.1 days. The
number of pay days increased from 67.6 to 69.2
(Dabur India )
Due to the financing of capex, the interest service coverage ratio decreased from 68.6 to 33.4 as a
result of rising finance costs.
1
(Dabur India )
(Dabur India )
Working Capital in the company experienced a notable decrease, going from 29.7 days in FY2019–20
to 14.1 days in FY2020–21. This was mainly due to a decrease of receivable days, which went from
33.9 in FY2019–20 to 21.4 in FY2020–21. The number of inventory days increased from 57.9 to 66.0.
From 62.1 to 73.3 pay days were added.
(Dabur India )
The company's debtor turnover ratio increased from 10.8 to 17.1 as a result of better receivables
management. Due to the decrease in interest expense brought on by the repayment of debt, the
Interest Coverage Ratio climbed from 36.2 in FY2019–20 to 65.0 in FY2020–21.
2
(Dabur India )
Throughout the year, the working capital employed in the business remained constant at 29.7 days.
Inventories increased slightly from 55.6 to 57.9 days, while Trade Receivables decreased from 35.7 to
33.9 days. Trade payables remained stable at 62.1 days.
(Dabur India )
During the year, the working capital employed in the business increased from 26 to 29 days.
Inventories were reduced from 59 to 56 days, while trade payables were reduced from 66 to 63 days.
Trade receivables increased from 33 to 36 days.
Mar 23 Mar 22 Mar 21 Mar 20 Mar 19
Particulars Mar 19 (in Mar 20 Mar 21 Mar 22 (in Mar 23 (in
3
crores) (in crores) (in crores) crores) crores)
Working Capital 939.47 1,928.23 1,622.74 716.38 128.01
Debtors 833.56 813.89 561.58 646.15 848.75
Inventory 1,300.53 1,379.57 1,734.28 1,911.37 2,024.20
Dabur’s inventory levels have increased year after year, necessitating additional investment in
working capital to increase these inventory levels to aid growth, as seen when working capital is
doubled in March 2020 in comparison to March 19, but it is cut in half from the year 21-22 with
inventory increasing at the same rate.
Conclusion
FMCG companies have significant working capital requirements for a variety of reasons, including
inventory management, competitive pricing, marketing and promotion, compensating for losses due
to shelf life, supply chain difference, and so on. In such instances, the sources of working capital
finance play a significant influence in the overall health of the company's balance sheet. Dabur's
financial statements show that primary working capital funding is done through short-term
borrowings, since key internal sources of funds are spent on capex for their future aspirations of
overseas development.
Dabur can increase its working capital funding by redirecting funds from short-term debt to internal
sources. One thing the corporation can do is cut the dividend payout and boost the retention rate of
annual net profits. As a result, the company can fund its working capital requirements with internal
reserves rather than external debt, decreasing interest expense responsibility, which can then be
used as working capital. Because the firm is fast developing and a large portion of the budget has
been allocated to capex, the company's sales growth is sure to accelerate in the future, necessitating
more inventory and efficient inventory management abilities, as well as increased working capital
requirements. As a result, using this company, you can boost working capital funding.

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Annual Working capital analysis done for 5 years

Mar 23 Mar 22 Mar 21 Mar 20 Mar 19

Particulars Mar 19 (in Mar 20 Mar 21 Mar 22 (in Mar 23 (in

Working Capital 939.47 1,928.23 1,622.74 716.38 128.01

Debtors 833.56 813.89 561.58 646.15 848.75

Inventory 1,300.53 1,379.57 1,734.28 1,911.37 2,024.20

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