Group Project of FINANCIAL MANAGEMENT - II

(Working Capital Analysis of Havells India Ltd)

Submitted By- Submitted To-

Dr. Neeraj Sanghi
GROUP NO. – 3 Professor & Area Head Finance
ANKITA AGARWAL – 2023025
HARSH KUMAR – 2023053
NAINCY – 2023084
SPARSH JAIN – 2023160
ANKITA BHARADWAJ – 2023026
SANDEEP NAYAK – 2023122
ADARSH PANDEY – 2023005

Date of Submission
29/04/2024
 OBJECTIVE

The objective of the study is to analyze the working capital

of Havells India Ltd, it’s inventory, receivable & cash
management.
This analysis would help in understanding whether the
company's capital is being utilized effectively to support
operations and growth, while also providing insights into
potential areas of improvement.
 Data Collection and Methodology
1. Data
Sources:
Collect primary data from Havells India Ltd. financial statements, annual reports, and accounting records.
Ensure the inclusion of relevant historical data to capture trends and changes over time.

2. Cost Categories:
Classify costs into specific categories, such as direct and indirect costs, fixed and variable costs, manufacturing
and non-manufacturing costs. This categorization helps in a more granular analysis.

3. Interviews and Surveys:

Conduct interviews with key personnel, including finance, production, and supply chain managers, to gather
qualitative insights into the cost allocation process. Employee surveys can provide additional perspectives.

4. Documentation Review:
Thoroughly review internal documentation, including cost accounting policies, procedures, and any relevant manuals.
This step ensures a comprehensive understanding of how costs are accounted for within the organization.

5. Benchmarking:
Utilize industry benchmarks from automotive and manufacturing sectors to compare Havells India Ltd. cost
structure. Consider key performance indicators such as cost per unit, operating margin, and efficiency ratios.

6. Cost Allocation Methods:

Examine the methods employed by Havells India Ltd. to allocate costs across its various products and services.
Evaluate the fairness and accuracy of these allocation methods, such as activity-based costing or traditional
costing.

7. Financial Analysis Tools:

Use financial analysis tools such as ERP systems, cost accounting software, and spreadsheet models to
facilitate quantitative analysis. These tools can aid in processing large datasets and performing complex
calculations.

8. Scenario Analysis:
Conduct scenario analyses to simulate potential changes in the business environment. Evaluate the impact of
variations in production volumes, fluctuations in raw material prices, or changes in market demand on the cost
structure.

9. Risk Assessment:
Identify and assess risks associated with cost management, including market volatility, supply chain
disruptions, and regulatory changes. Develop strategies to mitigate these risks and maintain cost stability.

10. Ethical Considerations:

Ensure ethical considerations are addressed in data collection, emphasizing compliance with industry
standards, confidentiality of sensitive information, and adherence to legal and regulatory frameworks.
11. Validation:
Validate data accuracy through cross-referencing multiple sources and ensuring consistency across financial
statements and supporting documentation.

12. Limitations:
Clearly articulate any limitations in the data collection and analysis process. This may include constraints on
data availability, potential biases, or uncertainties in external economic factors.

13. Data Analysis Techniques:

Apply quantitative analysis techniques such as cost-volume-profit analysis, sensitivity analysis, and regression
analysis to derive meaningful insights from the collected data.

14. Continuous Monitoring Plan:

Establish a plan for ongoing monitoring of cost-related data beyond the initial analysis. This involves
implementing systems for regular updates, trend analysis, and adapting strategies to changes in the economic
landscape.

By providing a detailed explanation in each of these areas, the "Data Collection and
Methodology" section ensures transparency, replicability, and a solid foundation for the
subsequent analysis of Havells India Limited.
 Data Analysis and Findings

DATA ANALYSIS FOR BALANCE SHEET

BALANCE SHEET OF Mar-23 Mar-22 Mar-21 Mar-20 Mar-19
HAVELLS INDIA (in Rs. Cr.)

12 months 12 months 12 months 12 months 12 months

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS
Equity Share Capital 62.65 62.63 62.6 62.58 62.55
TOTAL SHARE CAPITAL 62.65 62.63 62.6 62.58 62.55
Reserves and Surplus 6,549.53 5,925.48 5,101.21 4,241.59 4,179.71
TOTAL RESERVES AND 6,549.53 5,925.48 5,101.21 4,241.59 4,179.71
SURPLUS
TOTAL SHAREHOLDERS 6,614.48 5,988.64 5,164.45 4,304.81 4,242.53
FUNDS
NON-CURRENT LIABILITIES
Long Term Borrowings 0 272.57 393.65 0 40.5
Deferred Tax Liabilities [Net] 361.51 350.62 339.11 286.52 321.67
Other Long Term Liabilities 198.22 187.77 107.39 112.9 21.26
Long Term Provisions 136.72 76.25 58.43 35.57 32.36
TOTAL NON-CURRENT 696.45 887.21 898.58 434.99 415.79
LIABILITIES
CURRENT LIABILITIES
Short Term Borrowings 0 122.96 98.55 0 0
Trade Payables 2,642.54 2,379.41 1,596.78 1,414.07 1,559.36
Other Current Liabilities 914.82 873.71 804.31 683.98 758.54
Short Term Provisions 274.91 253.23 257.55 210.01 202.86
TOTAL CURRENT 3,832.27 3,629.31 2,757.19 2,308.06 2,520.76
LIABILITIES
TOTAL CAPITAL AND 11,143.20 10,505.16 8,820.22 7,047.86 7,179.08
LIABILITIES
ASSETS
NON-CURRENT ASSETS
Tangible Assets 2,227.77 2,021.34 1,860.70 1,899.44 1,430.60
Intangible Assets 1,392.80 1,412.16 1,429.60 1,449.98 1,470.21
Capital Work-In-Progress 163.42 56.75 86.26 82.77 232.15
Other Assets 0 0 0 0 0
FIXED ASSETS 3,786.98 3,490.71 3,380.21 3,435.55 3,133.47
Non-Current Investments 20.45 274.31 1.63 1.63 58.26
Deferred Tax Assets [Net] 0 0 0 0 0
Long Term Loans And Advances 0 0 0 0 8.85

Other Non-Current Assets 283.99 152.91 151.23 157.11 167.58

TOTAL NON-CURRENT 4,091.42 3,917.93 3,533.07 3,594.29 3,368.16
ASSETS
CURRENT ASSETS
Current Investments 180.87 153.42 306.3 0 0
Inventories 3,708.47 2,968.08 2,619.89 1,871.88 1,917.03
Trade Receivables 971.33 764.83 560.31 240.92 404.78
Cash And Cash Equivalents 1,861.87 2,535.84 1,624.74 1,106.92 1,284.83
Short Term Loans And Advances 0 0 0 0 0

OtherCurrentAssets 329.24 165.06 175.91 233.85 204.28

TOTAL CURRENT ASSETS 7,051.78 6,587.23 5,287.15 3,453.57 3,810.92
TOTAL ASSETS 11,143.20 10,505.16 8,820.22 7,047.86 7,179.08

PROFIT & LOSS ACCOUNT Mar-23 Mar-22 Mar-21 Mar-20 Mar-19

OF HAVELLS INDIA (in Rs.
Cr.)
12 mths 12 mths 12 mths 12 mths 12 mths
INCOME
REVENUE FROM 16,763.37 13,785.50 10,353.35 9,396.04 9,967.42
OPERATIONS [GROSS]
Less: Excise/Sevice Tax/Other 0 0 0 0 0
Levies
REVENUE FROM 16,763.37 13,785.50 10,353.35 9,396.04 9,967.42
OPERATIONS [NET]
 Analyze Mar’23 data with the average of next 4 years.

Avg of Next 4
Mar-23 Mar-22 Mar-21 Mar-20 Mar-19 years Comments
Working
Capital (CA-
CL) 3,219.51 2,957.92 2,529.96 1,145.51 1,290.16
Investment(
Share
Holders
Fund + Non-
Current
Liabilities) 7,310.93 6,875.85 6,063.03 4,739.80 4,658.32
Current
1.69
Ratio 1.84 1.82 1.92 1.50 1.51 over liquidity
Working
Capital
6.2
Turnover Efficiency to use working
Ratio 5.2 4.7 4.1 8.2 7.7 capital is not up to mark
Working
Capital to Working capital % is high
0.34
Investment in investment (NOT GOOD
Ratio 0.44 0.43 0.42 0.24 0.28 FOR COMPANY)
Sales to
Inventory 4.70 Inventory management is
Ratio 4.52 4.64 3.95 5.02 5.20 not upto mark
Sales to
cash and
cash 0.57
equivalent Cash management is not
Ratio 0.49 0.70 0.59 0.48 0.51 upto mark

FORMULA
WC= CA-CL
INVESTMENT= SHARE HOLDER FUND+ NON CURRENT LIABILITES
CR=CA/CL
WCTR= REVENUE FROM OPERATION (NET)/ WORKING CAPITAL
WCTIR= WORKING CAPITAL/ INVESTMENT
STIR=REVENUE FROM OPERATION/ INVENTORY
 Key Findings of the above data

Here are the concise key findings from the working capital analysis of Havells India
Ltd. based on the provided data from March 2019 to March 2023.
Liquidity Concerns: The Current Ratio has been gradually increasing or over
liquidity. Company has ability to pay debt obligations, or current liabilities, without
having to raise external capital or take out loans. High liquidity means that a
company can easily meet its short-term debts.
Improved Efficiency: Efficiency to use working capital is not up to mark, Working
Capital Turnover Ratio, indicating more efficient use of working capital in
generating sales.
Investment Strategy: Working capital % is high in investment, an excessively high
ratio might indicate operational inefficiency. A high ratio can mean a company is
leaving a large amount of assets sit idle, instead of investing those assets to grow
and expand its business.
Stable Inventory Management: Inventory management is not up to mark.

Better Receivables Management: Cash management is not up to mark, suggesting

better efficiency in collecting receivables and converting them into cash.

These findings provide a starting point for a more in-depth cost analysis, including
a review of cost drivers, cost allocation methods, and comparison with industry
benchmarks for further insights.
 CONCLUSION

Havells India Ltd. has demonstrated significant decrement in revenue growth and
significant unstability in working capital efficiency over the past five years.
However, the declining current ratio suggests a need for cautious management of
liquidity to ensure the company can continue to meet its short-term obligations
without stress. Continued monitoring and perhaps a slight adjustment in working
capital strategies might be required to sustain both growth and financial stability.
The bad performance in inventory and receivables management also reflects poor
company’s operational efficiencies, contributing to its overall financial health.
 BIBLIOGRAPHY

1. Havells India Ltd. (Official Website).

(https://www.havells.com/en/aboutus.html)

2. Money control.
(https://www.moneycontrol.com)

3. Reuters. "Havells India Ltd Company Profile & Facts."

(https://www.reuters.com)

4. Bloomberg. "Havells India Ltd (HMCL: Natl India)."

(https://www.bloomberg.com)