A

Presentation
On
Analysis Of Working Capital Management
&
Ratio Analysis
For
AMUL

Kaira District Cooperative Milk Producers

Union Ltd.
(AMUL)
Presented by –
Dave Girija
Exam Seat No.
35
M.B.A. Semester
Anand Institute Of Management
 DAIRY INDUSTRY
OVERVIEW
• White revolution program
• Operation Flood
• NDDB
• GCMMF
AMUL

INDIA’S POSITION
• second largest milk producer
• average annual growth = 7%
• per day milk procurement = 20 million litres
• total 1,14,300 co-operative societies
 STRENGTHS OPPORTUNITIES

• Demand absolutely optimistic • Value addition

• Flexibility of product mix • Export opportunity
• Availability of raw material • Alternative use of Milk
AMUL

SWOT ANALYSIS
WEAKNESS THREATS

• Perishability of product • Milk vendors

• Problematic distribution • Global competition
• Logistics of procurement
• Competition
 HISTORY OF AMUL
• Kaira District Co-operative Milk Producer’s Union selected the brand
name ‘AMUL’ for its product range in 1955.
AMUL

• The AMUL was started with one society and now it is converted into a
union with 1073 societies.

• At the beginning, AMUL collected only 250 litres of milk per day.

• Now, AMUL collects 12 lakhs of litres of milk every day.

 AMUL… TODAY
• Production: Peak Season = 18 lac litres
Slack Season = 6 lac litres

•AMUL products' mascot :

AMUL

"AMUL baby" (a chubby butter girl usually

dressed in polka dotted dress)

• Tag line “Utterly Butterly Delicious AMUL”

 PRODUCTION DEPT.
1. Mogar Plant
Products Chocolates, Nutramul, AMUL Lite and AMUL Ganthia
2. Anand Plant
Products Milk, Buttermilk, Milk Powder, Butter, Ghee and
AMUL

Flavored Milk
3. Kanjari Plant
Product Cattle feed

4. Khatraj Plant
Product Cheese

5. Pune Plant
Products Milk & Curd

6. Calcutta Plant
Products Milk, flavoured milk & ice cream
 PRODUCT RANGE
BUTTER
GHEE

MILK
AMUL

PIZZA CHEESE

GULAB JAMUN DAHI

NUTRAMUL

LASSI

BASUNDI
ICE CREAM
MILK SHAKE
 HUMAN RESOURCE DEPT.
• Recruitment
• Selection
• Performance Appraisal
AMUL

• Training & Development

• Wages & Salaries
• Grievance Handling
– Patharna Committee
– Safety Committee
– Canteen Committee
• Promotion & Transfer
• Employment Welfare Activities
 FINANCE & A/C DEPT.
1. ACCOUNTS DIVISION
• prepare voucher, bills, cheques, etc.

2. ESTA DIVISION (Establishment of accounts division)

AMUL

• prepare payroll of employees

• all the expenses related to salaries and wages, PF, gratuity, etc.

3. PURCHASE BILL DIVISION

• issues cheque or draft to party

4. MIS DIVISION
• handles data related accounts
• data base system
• accounting software system Tally 6.3.
 FINANCE & A/C DEPT.
ACCOUNTING POLICIES :

1. Method Of Accounting
Accrual System
AMUL

2. Depreciation
WDV Method

3. Inventories
FIFO Method

4. Retirement, Bonus, PF, etc. Benefits

Acts.
 MARKETING DEPT.
1. Product
2. Price
3. Place
4. Promotion
AMUL

Utterly… Butterly…
Delicious AMUL
 PURCHASE & STORES DEPT
• Purchase Department
• Cattle feed Purchase Department
• Stores Department
• Purchase Bill Section – ERP System
AMUL
 QUALITY ASSURANCE DEPT
• milkotestor
• extensive research and development activities in biotechnology
• aimed at developing formulations and technologies useful for
improving the productivity of milch animals
AMUL
 OVERVIEW OF THE PROJECT
TITLE OF THE PROJECT
A project report on “Analysis of Working capital management &
Ratio Analysis” of Kaira District Co-operative Milk Producers Union
Ltd. (AMUL).
AMUL

OBJECTIVES OF THE STUDY

• to study the working capital of the firm
• to know the financial condition of the organization
• to know the return of various investments
 OPERATING CYCLE
Particulars 03-04 04-05 05-06 06-07 07-08

A Raw material 3 days 5 days 5 days 6 days 6 days

conversion period
B Work-in-progress 26 days 23 days 34 days 32 days 32 days
conversion period
C Finished goods 39 days 121 days 118 days 78 days 192 days
AMUL

conversion period
D Debtors conversion 36 days 50 days 37 days 28 days 30 days
period
GROSS OPERATING CYCLE

GOC = A+B+C+D 104 days 199 days 194 days 144 days 260 days

E Creditors conversion 44 days 39 days 35 days 34 days 29 days

period
NET OPERATING CYCLE

NOC = A+B+C+D-E 60 days 160 days 159 days 110 days 178 days
 OPERAT ING CYCLE

300 260
250 231
199 194
200 159
160 144

DAYS
GOC
150 110
104 NOC
100 60
50
0
2003-04 2004-05 2005-06 2006-07 2007-08
AMUL

INTERPRETATION

• Increase in capital w.i.p. conversion period

• Increase in finished goods conversion period
• Decrease in collection period (liberal credit policy)
• An increase in overall demand of dairy products in these 5 years period
 RISK RETURN TRADE OFF
YEAR LIQUIDITY PROFITABILITY
CA FA CA:FA NET NET SALES PROFITABILITY
PROFIT
2003-04 16106.2 9588.26 1.68 252.46 54088.29 0.47
2004-05 18596.49 6107.85 3.05 311.23 59459.07 0.52
AMUL

2005-06 18990.94 4968.66 3.82 323.74 70206.23 0.46

2006-07 19874.21 5371.69 3.70 411.5 81631.69 0.50
2007-08 28995.9 6122.97 4.74 451.51 107187.29 0.42

INTERPRETATION

• High CA/FA ratio indicate higher liquidity

• Minor fluctuations in profitability
• Conservative policy
 WORKING CAPITAL REQUIREMENT
Particulars 03-04 04-05 05-06 06-07 07-08
A CURRENT ASSETS
1. Stock 4588.81 7662.36 9671.26 9077.90 15737.88
2. Debtors 5366.06 8228.99 7130.26 6388.23 8863.31
3. Prepaid expenses & advance 443.29 768.89 793.72 679.97 1083.49
4. Cash and bank balance 5708.04 2219.70 1395.69 3728.11 3311.22
AMUL

Total (A) 16106.2 18596.49 18990.94 19874.21 28995.9

B CURRENT LIABILITIES

1. Creditors 5800.8 4543.47 7588.45 9975.10 11980.68

2. Outstanding expenses 747.58 768.89 955.75 1076.90 1423.59
3. Deposits 230.08 163.81 347.39 380.71 168.24
Total (B) 6778.4 7933.20 8891.59 11432.71 13572.51
C NET WORKING CAPITAL (A-B) 9327.74 10663.29 10109.34 8441.50 15423.39
D ADD CONTINGENCY MARGIN 7.54 55.36 69.20 673.83 319.90
(PROVISION)
E TOTAL WORKING CAPITAL 9335.28 10718.65 10178.54 9115.33 15743.29
REQUIRED
 FINANCIAL RATIO SUMMARY
PARTICULARS 2003-04 2004-05 2005-06 2006-07 2007-08
LIQUIDITY RATIO
CURRENT RATIO 2.38 2.34 2.14 1.79 2.14
QUICK RATIO 1.7 1.37 1.05 0.95 0.98
CASH RATIO 0.842 0.280 0.176 0.326 0.244
NWC RATIO 0.976 1.078 1.254 1.493 1.162
LEVERAGE RATIO
DEBT EQUITY RATIO 6.87 6.09 4.03 1.86 4.95
AMUL

CAPITAL EQUITY RATIO 7.87 7.09 5.03 2.86 5.95

ACTIVITY RATIO
INVENTORY TURNOVER 5.47 5.71 5.38 6.00 6.10
DEBTORS TURNOVER RATIO 10.08 7.23 9.58 12.78 12.09
NA TURNOVER RATIO 5.64 9.73 14.13 15.20 17.51
CA TURNOVER RATIO 3.36 3.20 3.7 4.11 3.7
TA TURNOVER RATIO 2.05 2.35 2.85 3.17 2.99
WC TURNOVER RATIO 5.8 5.58 6.95 9.67 6.95
PROFITABILITY RATIO
GROSS PROFIT RATIO 39.16 41.87 38.41 37.25 35.46
NET PROFIT MARGIN 0.47 0.52 0.46 0.50 0.42
NOPAT MARGIN 2.5 1.95 1.63 1.39 1.2
ROE 7.89 9.01 8.62 9.75 9.83
ROTA 5.13 4.59 4.65 4.39 3.59
RONA 14.1 18.9 22.4 20.8 20.7
 EVALUATION OF AMUL’S
EARNING POWER
Particulars Formulae 2003-04 2004-05 2005-06 2006-07 2007-08
Net Asset turnover Sales 5.64 9.73 14.13 15.20 17.51
ratio NA
GP Margin GP * 100 39.16 41.87 38.41 37.25 35.46
Sales
Operating Leverage EBIT 0.0638 0.047 0.0413 0.037 0.033
GP
AMUL

NOPAT Margin EBIT 2.5 1.95 1.63 1.39 1.2

Sales
RONA EBIT * 100 14.1 18.9 22.4 20.8 20.7
NA
DFL PAT * 100 0.19 0.27 0.29 0.37 0.36
EBIT

Financial Leverage NA NW 3 1.77 1.32 1.27 1.33

ROE PAT * 100 7.89 9.01 8.62 9.75 9.83

NW
Retention RE 0.76 0.8 0.93 1.13 0.82
PAT
Equity Growth RE * 100 5.97 7.26 8.04 11.07 8.05
NW
AMUL

INTERPRETATION

• high return on their investments

• minor variation in return on equity
 FINDINGS
From working capital and operating cycle the following
conclusions can be drawn-

• working capital requirement of AMUL is financed through raising

AMUL

the cash credit loans and the short term loans

• conservative policy to finance its current assets
• a large operating cycle due to high w.i.p. conversion period, high
finished goods conversion period & lower payable deferral period.
 FINDINGS
From ratio analysis the following conclusions can be drawn-

• Current ratio is ideal (2:1). So AMUL is able to meet its short term
obligations
• Quick ratio is near to ideal (1:1); which indicates sound position of
AMUL

liquidity
• AMUL has sufficient net working capital in last year so it indicates
good position in order to meet company’s needs
• Debt burden has been reducing since 2003 to 2006 and it can be
noticed that lower leverage ratio in 2006-07 has been due to loan
repayment. Again in 2007-08, AMUL has taken a loan so the ratio has
risen
• The speed of converting inventory to sales is increasing considerably
• Profitability ratios do not show much variation
• GP and NP Margin show minor fluctuations since 2003-04 to 2007-08
 BIBLIOGRAPHY
• I.M.Pandey, FINANCIAL MANAGEMENT,Vikas Publishing House Pvt. Ltd., 8th Ed
• Prasanna Chandra, FINANCIAL MANAGEMENT, Tata McGraw Hill Publishing
Company Ltd.
• 59th, 60th, 61st and 62nd Annual reports of AMUL
• www.amul.com
AMUL

• www.amuldairy.org
• www.nddb.org
• ‘Amul, now a billion dollar Co-operative enterprise’, Economic Times, June 23, 2008
http://www.ibef.org/artdisplay.aspx?cat_id=60&art_id=19457&refer=n64
• ‘Amul, ready to take over Pepsi, Coke in sports drink segment, Lalitha Srinivasan,
Financial Express, Mumbai, Jan 10th.
http://www.financialexpress.com/old/fe_archive_full_story.php?content_id=114144
• http://www.indairyasso.org/world%20dairy%20report.htm
• http://www.mdcdatum.org.uk/MilkSupply/WorldMilkProduction.html
• http://www.indiadairy.com/ind_swot.html
AMUL