STUDENT DECLARATION

I hereby declare that the project report titled

WORKING

CAPITAL at INDIAN SUGAR & GENERAL ENGINEERING

CORPORATION,

YAMUNA

NAGAR

submitted

in

partial

fulfillment of the requirement for the Degree of Master of Business

Administration in Finance is record of bonafide research work carried
out by ANKIT WALIA and that no part of this report has been
submitted for the award of any other diploma ,degree fellowship or
other similar title prize.The report is based on my personal opinion
hence cannot be referred for official or legal purpose.

Place: Yamuna Nagar

Date:_____________
(Signature)

ACKNOWLEDGEMENT
Any work study is never an individual own efforts. It is contributed
effort of many hearts, hand and heads.
I give my great sense of privilege in submitting this project work, for
which I am grateful and indebted to Mr. Rajinder Agnihotry (Training
Officer) for allowing me to undergo my training and to do this project
at ISGEC. I sincerely acknowledge his help, efforts and cooperation as
well as timely guidance, which helped me to complete my project.
I express my sincere gratitude to my industry guide Mr. Lalit Bansal
(SENIOR ACCOUNTANT), and ISGEC fordable guidance, continuous
support and cooperation throughout my project, without which the
present work would not have been possible. I would also like to thank
the entire team of ISGEC, for the constant support and help in the
successful completion of my project.
I liked to thanks all persons who helped me directly or indirectly in
preparation of this report.
(ANKIT WALIA)

PREFACE
Master of Business Administration is a course, which combines both
theory and its application in the field of management. As part of this
course, every aspirant has to undergo "a project". The purpose of this
research project is to expose the students of management with the
happening of real world.
I was fortunate enough to get this opportunity by taking the project on
"Working Capital Management in INDIAN SUGAR & GENERAL
ENGINEERING CORPORATION, Yamuna Nagar. It enhances my

knowledge regarding this area of operation.

Every student has to prepare and submit a report on the working of its
project. This report is the research work of the aspirant. It is an attempt
to present an account of practical knowledge of the same.

ANKIT WALIA

CHAPTER 1
INTRODUCTION

CHAPTER- 1
INTRODUCTION
The group is called the Saraswati Industrial Syndicate Limited (Sis). It
was started in 1933 with the establishment of saraswati sugar mills.
This incidentally now happens to be once of the biggest industries in
the country with the cane crushing capacity of above 12000 PD. over
the years, three more units namely the INDIAN SUGAR & GENERAL
ENGINEERING

CORPORATION

(ISGEC),

ISGEC

JOHN

THOMPSON (IJT) and UP STEELS (UPS) were added.

Today the annual turnover of ISGEC for each year exceeds us $ 24
million & group turnover of saraswati industrial syndicate limited
exceeds us $ 100 million.
The group include over 5000 people, which include engineers,
technicians & skilled craftsmen. Many of the have undertaken advanced
training in the UK, USA, ITALY, CANADA, AUSTRALIA,
GERMANY & RASSIA.
The engineering group was launched in 1946 with the establishment of
the Indian sugar & general engineering corporation (ISGEC). It
manufactures a variety of heavy engineering for varied application.
ISGEC John Thompson (IJT) located at Noida
supplies boilers & associated equipment on turnkey
basis.
In 1960, ISGEC collaborated with John Thompson
from a joint company by the name of ISGEC JOHN
THOMPSON.

 UP steels (UPS) was acquired in 1981 & merged

later the parent company. as a foundry established in
1966 with the technical know-how from the Japans
Kobe steels, UP steels has its main plant in
Muzaffarnagar (UP) about 100 km. from north of
DELHI. it manufactures sophisticated Alloy/Steel
castings both, hand & machine molded as well as
Alloy iron & Steel ingots.
The company was promoted by late Sh. D.D. puri and presently being
chaired by Mr. Ranjit Puri (chairman & managing director). The
company is a public limited company & The Directors Of The
Company Are:
MR.RANJIT PURI

CHAIRMAN &

MANAGING DIRECTOR
MR. ADITYA PURI

JOINT MANAGING

DIRECTOR
MR. C.R. THOMPSON

DIRECTOR

MR. B.L. WADHERA

DIRECTOR

MR. TAHIR HASAN

DIRECTOR

MR. K.K. VIJ

DIRECTOR

MR. SUJATA VARADARAJAN

DIRECTOR

MR. VINOD K. NAGPAL

DIRECTOR

MR. LALIT MEHRA

DIRECTOR

MR. S.C.JOLLY

DIRECTOR

Audit Committee:
MR. K.K. VIJ- CHAIRMAN
MR. VINOD K. NAGPAL
MR. LALIT MEHRA
Bankers:

SATATE BANK OF PATIALA

STANDARD CHARTERED BANK
STATE BANK OF TRAVANCORE
STATE BANK OF INDORE
STATE BANK OF HYDERABAD
PUNJAB NATOINAL BANK
CORPORATION BANK

Register Office:
YAMUNANAGAR, HARYANA
President & Company Secretary:
MR. S.K. KHORANA
Units:
INDIAN SUGAR & GENERAL ENGINEERING
CORPORATIO
ISGEC JOHN THOMPSON
UTTAR PRADESH STEELS

INDIAN SUGAR AND GENERAL ENGINEERING

CORPORATION
THE COMPANY
ISGEC is the heavy engineering unit of Saraswati industrial syndicate
limited. It was established in 1946 & is located at Yamuna Nagar,
haryana, about 198 km. from Delhi.
ISGEC is famous worldwide for the manufacture of Pressure Vessels
gas containers, heat exchangers & Presses.
APPROVAL

ISGEC has been approved by Lloyds register of

quality assurance as an ISO-9001 company.

ISGEC is authorized by American society of

mechanical engineers for the use of ASME 'U' & 'S' code
stamps.

Lloyds register as Class-1 manufacture of fusion

welded Pressure Vessels up to 200mm thickness approves
ISGEC.

Engineers

India

ltd

approves

ISGEC.

For

manufactured of heat exchangers up to maximum tube

thickness of 300mm.

Engineers

India

ltd

approves

ISGEC.

for

manufactured of Vessels & columns in carbon & alloy steel

up to 150 mm thickness & in Clad steel up to 132 mm

thickness.

PRODUCT RANGE
Diversity of product range is the stimulus on which ISGEC thrives.
They manufacture:
Process Plant Equipment including Pressure Vessels, columns,
towers, reactors, regenerators, shell & tube heat exchangers,
autoclaves, etc. for fertilizers, refineries, petrochemicals & other
chemical industries in various material of construction including
carbon steel, clad steel duplex stainless steel & non ferrous
materials.
Containers for chlorine & other liquefiable gases. ISGEC has
manufactured more than 50000 containers & are the largest
manufacturer of containers in the world.
Boilers pressure parts for water tube boilers including boiler drums,
super heaters, economizers, panel & manifolds,
Heavy duty mechanical presses (up to 1000) & hydraulic presses
(3000 tones) for sheet metal & other applications for automobile,
railways & various other industries.
Sheet plant equipment & sugar machinery.
high quality grey iron & alloy casting (weight tones single piece)
for the chemical industry, dye & intermediate dye industry &

soda ash plants , pumps & compressors manufacture, machine

tool manufactures.

INFRASTRUCTURE
Human resources include about 400 qualified & experienced
engineers/supervisors apart from skilled works men. ISGEC have
employed over 1700 people.
ISGEC has well equipped factory, covering an area of about 25
hectares including covered production area of more than 50000
square meters spread over 11 production bays.
There are overhead cranes in all the ayes with maximum crane
lifting capacity of 150 tons.
extensive facilities for hot & cold working, welding, heat
treatment & testing to ensure that compliance to quality
standards.
More than 125 sophisticated machines & machine tools are
installed in various production bays.
More than 150 welding machines are under operation.
Capacity for manufacturing and supply of reactors.

ISGEC COLLABORATIONS
Working continuously towards further excellence in technology, ISGEC
entered into technical collaboration with internationally well-known
companies.
Some of the companies are shown below:1955

A.F.CRAIG & CO., UK

SUGAR MACHINERY

1960
JOHN THOMPSONS, UK
BOILERS & PRESSURE VESSELS

INDUSTRIAL

1963

KAWASAKI, JAPAN

CEMENT MACHINERY

1964

FARRELL, USA

SUGAR MILLS

1966

JOHN SHAW & SONS

HYDRAULIC PRESS

1967
NE INTERNATIONAL
BOILER, ROD MILLS
COMBUSTION, UK

PULVERIZED FUEL

1968
BRONX, UK
LEVELING MACHINES

PLATE BENDING &

1980

ROVETTA, ITALY

MECHANICAL PRESS

SOME OF OUR INTERNATIONAL CLIENTS

Phung Hiep Cane Sugar Factory, Vietnam
Lamson Sugar Factory, Vietnam
Binh Duong Sugar Corporation, Vietnam
Bangladesh Sugar & Food Industry Corporation, Bangladesh
Bien Hoa Sugar Joint Stock Company, Vietnam
Gula Padang Terap, Malaysia
Sugar Corporation of Uganda Ltd., Uganda
South Nyanza Sugar Co., Kenya
Khanh Hoa Cane Sugar Factory, Vietnam
Biscom, Philippines
Danao Development Corporation, Philippines
Don Pedro Sugars, Philippines
Fletcher Smith Ltd., UK

First Farmers Sugars, Philippines

Guyana Sugar Corporation, Guyana
Lopez Sugar Corporation, Philippines
Pena Francia Sugars, Philippines
Fauji Sugar Mills, Pakistan
Sartaj Sugar Mills, Pakistan
Birganj Sugar Factory, Nepal
Caroni (1975) Ltd., Trinidad

SOME OF OUR INDIAN CLIENTS

Saraswati Sugar Mills, Haryana, India
Mawana Sugar Works, Uttar Pradesh, India
Daya Sugars, Uttar Pradesh, India
Nagar Taluka SSK Ltd., Maharashtra, India
Babasaheb Ambedkar SSK Ltd., Maharashtra, India
Bapuji Rao Deshmukh SSK Ltd., Maharashtra, India
Kedareshwar SSSK Ltd., Maharashtra, India
Chopda SSSK Ltd., Maharashtra, India
Gayatri Sugar Complex, Andhra Pradesh, India
Sayan Vibhag Khand Udyog Mandli Limited, Gujarat, India
Riga Sugar Mills Ltd., Bihar, India

Ramgarh Chini Mills Ltd., Uttar Pradesh, India

Titawi Sugar Complex, Uttar Pradesh, India
Tikaula Sugar Mills Ltd., Uttar Pradesh, India
Prabhulingeshwar Sugar Works Ltd., Karnataka, India
Gem Sugars Ltd., Karnataka, India
Magna Agro Industries Ltd., Lucknow, India
Kothari Sugars & Chemicals Ltd., Tamil Nadu, India
Chandrabhaga SSK Ltd., Maharashtra, India
Neoli Sugar Factory, Uttar Pradesh, India

ORGANISATIONAL STRUCTURE

T
department.

he chart of the organization structure of ISGEC showed

the various hierarchal levels of the organization.
Organization is

divided

into various

departments

managed by different general manager of the concerned

SIS
IJT NEWDELHI
ISGEC
(YNR)
SARASWATI SUGAR MILL
U.P.STEELS MUZZAFFA-RNAGAR
(YNR)

ISGEC JOHN THOMPSON (IJT)

IJT is located at Delhi. It supplies boiler & associated equipments on
turnkey basis. In 1960 ISGEC collaborated with john Thompson, U.K. ,
to from a joint company by the name of ISGEC JOHN THOMPSON.

U.P. STEELS (UPS)

This was acquired in 1981 & merged with parent company. As a
foundry establishment in 1966 technical know-how from Japans Kobe
steels, UPS has its main plant sit muzzafarnagar (U.P.). It manufactures
sophisticated alloy steel/steel castings both hand & machine rounded as
well as alloy iron castings steel ingots
U.P. steel has obtained the prestigious Lloyds certification & is
now on the Lloyds register international list of class-1 founder for
manufacture of casting in different grades of steel.

ISGEC
The engineering group was launched with establishment of ISC-FC. It
was founded in 1946 as a public limited company under the company
act, 1956. It manufactures a variety of heavy engineering for varied
applications.
I conducted my project study at ISGEC (works),
yamunanagar. So, here I am going to, describe the things in context of
ISGEC (works), yamunanagar only.

SARASWATI SUGAR MILL

It was the first unit being established in 1933. It introduced massive
modernization program that leads to increase in the capacity from 8000
to 9600 tones-cane-crushed per day. It was undertaken at the cost of
rs.30 crores. Ssm secured a prestigious order of 10 lakh tones of sugar,
exports are expected to be substantially lower this year because world
price are fallen. It is one of leading manufacturing sugar company in
India.

GROUP TURNOVER

Our group turnover has increased manifold over the last ten years:
Amount in million of rupees
2001-2002
2002-2003
2003-2004
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011

4790
5085
2642
3056
4403
4790
5198
4509
5067
5893

6000
5000
4000
3000
2000
1000
0
1

10

COMPETITORS
ISGEC has diverse competitors for its varied range. In container group.
ISGEC has monopoly till 1997 as its market! Here nearly 95% different
products of ISGEC have different market shares. But the major
competitors can be categorized as:

GODREJ
HMT
L&T
BHEL

CAPITAL STRUCTURE OF
ISGEC
By Capital structure we mean combination of debt and equity that leads
to the maximum value of the firm. As ISGEC is a subsidiary of the
Company SIS so having no capital of its own. In place of Capital it

has investment of Head Office and the Capital of SIS can be studied as
follows :

AUTHORIZED CAPITAL OF ISGEC :

The present authorized capital of company is 709.99 lacs shares of Rs.
10/- each. Presents there are no preference shares in the capital of the
company.
SHARE HOLDING PATTERN OF ISGEC
The paid up capital of the company is Rs. 709.99 lacs comprising of
70,99,900 shares of Rs. 10/- each with Saraswati Industrial Syndicate
Limited, Yamuna Nagar.

OBJECTIVE OF THE STUDY

To know the pattern of the working capital management at
(ISGEC), Yamuna Nagar.

To know the profitability of the company .

To know various sources of Working Capital.

CONCEPT OF WORKING CAPITAL

MANAGEMENT OF WORKING
CAPITAL
SOURCES OF FINANCE OF WORKING
CAPITAL

CONCEPT OF WORKING
CAPITAL

INTRODUCTION
Fixed assets from the skeleton of any business, working capital is its
flash and blood. For a going concern the fixed assets are of permanent
nature and are not to be sold. The other type of assets require for day to
day working of a Unit are known as Current Assets which are floating
in nature and keep on changing during course of business. It is these
Current Assets which are generally referred to as Working capital is
what makes the company work. It is impossible to carry on any
business only with Fixed Assets, working capital is a must. Inadequacy
of WC chocks any business to death.
A healthy WC position is the sine-qua-non of a successful business
which is reflected in adequate inventories, lowest level of debtors,
minimum utilization of bank facilities for working capital etc.
IMPORTANCE OF WORKING CAPITAL
It is the objective of every firm to generate sufficient profits. This
eventually depends on the magnitude of the sales. However, SALES
DONT CONVERT INTO CASH INSTANTLY, There is time between
sales of goods and receipt of cash. Technically it is known as operating
of cash cycle. This time lag between the purchase of raw materials and
the realization from debtors force every Company to find money to
finance its operations during that item. For instance, if the time lag for a
Company is two months certain quantity of Stocks, Debtors and Cash
for day-to-day transactions.

The adequacy of WC helps in raising credit standing of a business

concern. A business enterprise with adequate WC is always in a
position to avail advantages of any favorable opportunity either to
purchase raw material or to execute a special order or to wait for better
market position. An adequate WC ensures favorable rates of interest on
bank loans.
The general moral of management increases by its financial soundness.
During slump the demand for going down goes up. A large amount is
booked in inventories and the receivable Companies having ample WC
can tide over period of depression.

ELEMENTS OF WORKING CAPITAL

There are two elements of WC
LONG TERM WORKING CAPITAL :
The long term WC represent the amount of funds needed to keep a
Company running in order to satisfy demand at its lowest point. The
value which represent the long term WC stay with the business process
all the time.
SHORT TERM WORKING CAPITAL :
The short term WC varies directly with the level of activity achieved by
a Company. It also changes from one to another, from cash to inventory,
from inventories to debtors and from debtors back to Cash.

DETERMINENTS OF WORKING CAPITAL

NATURE AND SIZE OF BUSINESS :
A firm with large scale of operation need more WC than small firm.
MANUFACTURE CYCLE :
Longer the manufacture cycle larger the firms WC requirement.
SALES GROWTH :
The WC needs of the firm increases as its sales grow.
DEMAND CONDITION :
Increase in demand will require further addition of Working Capital &
vice versa.
PRODUCTION POLICY :
A steady productions policy requires more Working Capital.
PRICE LEVEL CHANGES :
Rising price level require a firm to maintain higher amount of WC as
same level of current assets need more investment now.
OPERATING EFFICIENCY AND PERFORMANCE :
Better utilization of resources improves profitability and help in
releasing pressure on WC.
FIRM 's CREDIT POLICY :
A liberal Credit Policy without rating the credit-worthiness of
customers will require greater Working Capital.
AVAILABILITY OF CREDIT :
A firm will need less Working Capital if liberal credit terms are
available to it and vice versa.

MANAGEMENT OF WORKING CAPITAL

Working Capital Management refers to the administration of all aspects
of current assets namely Cash Marketable Securities, Debtors, Stock
(Inventories) and Current Liabilities.
To Finance Manager should have knowledge of the source of working
capital funds as well as investment avenues where ideal funds may be
temporarily invested? It must be seen that right source are tapped to
finance current assets and that the current liabilities are paid in time.
The goal of Working Capital Management is to manage the firm current
assets and current liabilities in such a way that a satisfactory level of

Working Capital is maintained, as without it firm is likely to be come

insolvent or even bankrupt.
Hence Working Capital Management has two objectives which are
likely to go in opposite direction i.e.
(i)

Liquidity

(ii)

Profitability

Liquidity:
Liquidity means ability to settle the bills on due dates. This is possible
only if you have adequate cash.
Profitability:
The Current resources be so managed that they contribute to overall
corporate profitability to the maximum possible extent. This is possible
only if the Company does not keep its current assets like Cash idle.

WORKING CAPITAL MANAGEMENT IN ISGEC

Any firm and ISGEC is no exception, faces an unavoidable need to
manage its working capital well. And in ISGEC it is being done with
expertise. For managing working capital in the Company, it prepares
various statements some daily, some monthly and also a few annually.
Some of these are sent to the Head Office for the purpose of sending it
to the Bank so that the bank may grant the credit limit after considering
these statements. Some statements sent to Head Office are kept by the
Head Office itself for keeping a record of the funds in the company and
there is shortage of funds then the Head Office make arrangements for
the funds and if there is any surplus then Head Office transfers these
funds to any of its other Units which is in need of funds. Some
statements are also such which are maintained by the Unit for keeping

with itself for the purpose of its own record. The Head Office may also
demand these statements for seeing into the matters of the Unit. The
Factory prepares the following type of statements :-

1.

FORM C-I & FORM C-II

2.

BANK STOCK STATEMENTS

3.

CASH FLOW STATEMENT

4.

BANK AVAILABILITY REPORT

FORM C-I & FORM C-II

Form C-I and C-II are prepared for the purpose of renewal and
enhancement of bank limits. This is prepared by the Factory whenever
demanded by the Head Office and give information for the whole year
C-I gives the position of the Company in the previous year and based
on actual figures. Form C-II shows the requirements of the Company
for the next year and based on both actual and estimated figures e.g. if
the head office demands Form C-II on 10 th of June 2001 for the year
ending September 2001. the Form C-II will show the actual position of
the company from October 1999 to May 2000 and estimate thereafter.
This form gives general information about the stock of the company
[ i.e. opening stock, production, releases and then closing stock] various
receipt during every month (From sales, loans and other receipts)
various payment and in the end a summary giving information about
the opening and closing balance of cash and cash credit at the end of
every month.

A Form C-II is also prepared by the factory showing actual position of

the factory after every month. This form is sent to the bank so that the
bank can see the actual position of the factory against the project one
after every month. The form gives information of all the receipts and
payments of the factory during that month.

2. BANK STOCK STATEMENTS

Under this two type of statements are prepared. Both are sent to the
Bank Obtaining CC Limits these are:
- Daily Bank Stock Statement of sugar
- Monthly Stores Statement
Daily Bank Stock Statement
This is a statement which is sent to the bank daily. The information
included in this statement is about the opening balance of sugar,
addition if any sugar issued and thereafter balance at the end of the day.
Balances are shown for both of sugar separately i.e. for levy and free.
Generally this statement also gives information about the debtors of the
company but as the bank doesnt grant credit to the ISGEC against its
sundry debtors so the information about the debtors of the company is
excluded from this statements.
The importance of stock statement is that it helps banker to have
knowledge about the stock of the company. The cash credit limit
sanctioned by the bank is secured though hypothecation of stock. Hence
current detail so the stock is the major requirements of bank. The
Drawing power (DP) of the company is font homed through the
detailed information of stocks. Bank fixed the credit limit for the
company every month. So the DP limit is also arrived at the end of the
every month.

HOW THE DP LIMIT IS ARRIVED AT ?

Drawing power is sum total of stock at the end of each month. Stock
includes raw material semi-finished goods and finished goods. After
keeping the required MARGINS which is 10% in case of levy sugar
and 15% in case of free sugar, Drawing power is arrived at which
ultimately determines the limit the company can use. The margin is
kept by the bank for the part of stock that could turn to be obsolete or
useless. It is on the desirous of the bank as they may grant the credit
limit less than the drawing power.
3.

CASH FLOW STATEMENT

A projected cash flow statement is also prepared by the factory for

every month to see whether the company will have sufficient cash to
meet requirements at the end of every month after availing cash credit
limit from the bank. And if there is any deficit at the end of the month
intimation of this is given to the Head Office to make some
arrangements . usually projected cash flow statement is prepared for 6
months. But if Head Office asks for preparing a projected cash flow
statement for more period then it is prepared accordingly. For managing
cash more efficiently a comparative cash flow statement is also
prepared by the company showing caparison of actual cash position
with estimated cash position. Reason are traced for any difference of
actual balance from the estimated balance. This statement is prepared
for each and every month in the the first week of next month and is for
the internal use of the factory. But the head office may also be demand
this vary statement as per its requirement.

4.BANK AVAILABILITY REPORT

A Bank availability report is also prepared by the factory on daily basis
to see the balance in credit limit granted by bank which the company
can avail. It gives information about the drawing power of the company
sanctioned cash credit limit less limit transferred to head office amount
drawn by the company out of available net drawing power. And at the
end the banks from which the company avails the limit. These banks are
State Bank of Patiala, Oriental Bank of Commerce, Corporation Bank
and other banks i.e. state bank of Travancore .This statement is
prepared for the purpose so that there is a check on the bank credit limit
i.e. how much fund the company can take from the bank in case of need
of fund.

SOURCES OF FINANCE FOR

WORKING CAPITAL
A firm has a choice among three sources of financing current assets or
working capital:
1.

Long Term Financing

2.

Short Term Financing

3.

Spontaneous Financing

Long term financing is done through shares, debentures, preference

shares, retained earnings and long-term debt from financial institutions.
Funds available for a period of one year or less are called short-term
finance. In India, short-term funds are used to finance WC. These
sources include short-term bank loans, commercial papers, factoring
receivables and public deposits.
Spontaneous financing refers to the automatic sources for short term
funds arising in the normal course of business. The major sources of
such financing are trade credit and outstanding expenses. The real
choice of financing current assets is between short term versus long
term financing. Various finance for WC are given below:
1.

Trade Credit

2.

Accrued Expenses &Deferred Income

3.

Public Deposits

4.

Bank Finance

1. Trade Credits: - Trade credit is an informal arrangement and is a

spontaneous source of financing working capital.
Supplier firm send goods to buy firm on credit, which means,
buying firm don't pay cash immediately for the purchases made on
the buyer's balance sheet, it appears as sundry creditors or accounts
payable. When the buyer sign a bill a negotiable instrument to
obtain trade credit, it appears on the buyer balance sheet as bills
payable. The benefit of trade credit is that when the company knows
that the drainage of cash has been deferred be some time, the
amount of cash equal to purchase value of material can be utilized in
earning some returns by investing in short term securities or be
crediting the same to its credit / overdraft account thereby reducing
the incidence of interest.
2. Accrued expenses and deferred income : Accrued expenses
represents a liability that a firm has to pay for the services, it has
already receives. They represents a spontaneous, interest free
services of financing e.g wages and salaries, taxes and interest.
Deferred income represents funds by the firm for goods and
services, which it has to supply in future e.g. advance payment made
by the customer.
3. Public deposits : mobilization of funds from general public
specially the middle and upper middle class people, by offering
reasonably attractive rate of return is another important source of
financing working capital. The Rate of interest can't exceed 15%
and it is compared on a quarterly basis. Public deposits are governed

by the regulation of public under the companies (Acceptance of

Deposits) Amendments rules 1978 :
A company can't raise more than 10% of its paid up share capital.
Government companies can accept deposits upto 35% of their paid
up share capital and free reserves.
The maximum maturity period allowed for public deposits is three
years, while the minimum permitted maturity period is six months.
A company inviting deposits from the public is required to issue an
advertisement about the main details of the company and the same
has to be filled to Registrar Of Companies (ROC) before publishing
it in the Newspaper and magazines.
4. Bank Finance : Banks are the main institutional sources of working
capital. A bank considers a firm's sales and production plans and
hence determine its working capital requirement. The amount
approved by the bank for the firm's working capital is called the
credit limit . But financial accommodation or credit limit 100% of
the value of the goods would not be granted by the banks and they
would fix a margin on the value of security, which must be provided
by the borrower and the amount will be financed by the bank.
a) Overdraft : In this the customer is permitted to overdraw up to a
prefixed limit. Interest in

charged on amount overdrawn.

Overdraft amount operates against security in the form of pledge

of shares and security of LIC policies.
b) Cash Credits : In cash credits, the customer is charged interest
only on the amount actually utilized from the prefixed limit. The

security offered by the customer is in the nature of hypothecation

of inventory and account receivables.
c) Discounting of Bills

: The bills raised on the buyer of the

company's goods are discounted (Full amount of the bill discount

charged by the bank) by bank. This facility helps the company in
realizing funds fast without waiting for credit period to get over.
d) Letter of credit : bankers open latter of credits (L/C) in favour of
supplier for raw materials. L/C contains a written undertaking
given by a bank on behalf of the purchaser to the seller to make
payment of a stated amount on presentation of stipulated
documents and fulfillment of all the terms and conditions
incorporated therein.
e) Bank guarantees: Bankers issue specific guarantees business
transactions between various parties including government
agencies. The Guarantees may broadly be divided into two
categories :
i) Financial Guarantee discharge, financial obligation to the
customers
ii) Performance Guarantee for the performance of a contract by
customers
f. Packing Credit of Pre-shipment : The goods meant for export
forms the primary security of banks guaranteeing packing credit
advance.
g. Working Capital Loans : A borrower some times require
accommodation in excess of sanctioned credit limit. The
borrower is required to pay higher rate of interest of additional
credit.

FUND BASED LIMITS:

These are credit facilities given by banks where actual banks funds are
involved. Fund based limits are given against hypothecation and ledge.
The categories of fund based limits are:
_

Cash Credit Limit (CC Limit)

CREDIT FOR EXPORT:

All

credit

facilities

sanctioned

to

exporter

for

producing/

manufacturing/ processing/ packing/ warehousing/ shipping the goods

meant for exports are termed as Pre-shipment Credit or Packing
Credit. It is similar to Cc with the only difference that CC limit is
sanctioned as running facility where as packing credit advance depends
on specific exports obligation met by the exporter.
Important point regarding packing credit are:
The facility is allowed to only those exporters whose track record
has been good and they are required to produce letter of
credit/firm export orders within a reasonable period of time.
All pre-shipment advances are to be liquidated from the proceeds
of exports bills.
The packing credit advance is granted up to the last date of
shipment or up to a maximum of 180 days. Further extension of
90 to up to maximum of 270 days can permitted if export orders
are not executed on completion of 180 days provided the bank is
satisfied for the delay in execution of export order.

FINANCING WORKING CAPITAL IN ISGEC:

ISGEC is financing its working capital requirements mainly from
Banks. Beside banks the other sources for working capital finance at
ISGEC are trade creditor and security need from the dealer.
WORKING CAPITAL LIMITS SANCTIONED BY BANKS:
ISGEC has availed working capital limits by borrowing from number
of Banks because of:
Large size of borrowing
To have a degree of flexibility in its operation with different
Banks.
It has been using consortium financing to take care of its entire needs.

CHAPTER 3
RESEARCH MTHODOLOGY

Research Methodology has many dimensions, it includes not only the

research methods but also consists the logic behind the methods used in
the context of the study and explain why only a particular method or
technique had been used so that search lend themselves to proper
evaluation. Thus in a way it is written game plan for concluding
research problem. IT is necessary to design a research methodology for
the problem as the same may differ from problem to problem.
The methodology that was followed includes both:
Primary Data Collection
Secondary Data Collection
Primary data collection included an in-depth study based on working
capital, management of working capital, sources of finance for current
assets and working capital and factors that affect working capital. A
detailed study was undertaken about ISGEC, its working capital, its
services, with the help of senior finance manager.
Secondary data collection included the data collected from September
30, 2011 and various documents and files related to study.

CONSORTIUM FINANCE:
It is based on the philosophy of sharing risks and gains. Its main
features are:
A formal consortium has to be compulsorily constituted in case
the find based WC limits are Rs.50 Crore or more.
The number of participating banks is a consortium should be
limits to four, five or six at the most. All banks forming a
consortium must evolve a common form of credit appraisal to be
obtained from the borrower.
ISGEC has entered into consortium banking arrangements as follows:
Name of the Bank
consortium
State Bank of Patiala
Oriental Bank of
Commerce
State Bank of Travancore
Punjab National Bank
Corporation Bank

%age share in the

arrangement
56.52
15.44
3.41
2.89
21.74

%age Share in the arrangements

State Bank of Patiala

Oriental bank of Commerce
State Bank of Travancore
Punjab National Bank
Corporation Bank

ISGEC has entered into consortium arrangement because of its large

requirement of fund non fund based limits and hence reduced its
dependence of any one leading institution.

TERM LOANS
Term loans comprises of various secured loans (backed by
hypothecation of certain assets) and unsecured loans taken from banks
and various other institution. The current debt of the factory is :

SECURED LOANS
Loans and advances from banks
Against stock stores and spares

As on 30.9.2011 (Rs. in Lacs)

State bank of Patiala

1201.51

Term Loans from IFCI

22.36

Term Loan from SDF

Total

438.64
1662.51

UNSECURED LOANS
Loans and advances from banks
SDF Loan

As on 30.9.2011 (Rs. in Lacs)

57.59

Head Office Account

4986.04

ISGEC Covema Limited

337.91

and ISGEC Exports

Limited
Fixed Deposits
Total

FACTORY RECEIVABLES:

1144.78
6526.32

Factoring is a Continuing arrangement between a financial

intermediary called a Factor and Seller of goods and services. It is
another important source of financing working capital but in India this
concept is new and has yet to establish its root. The factor performs the
following service in respect of the Account Receivables arising from
the sale of such goods or services.
1. Purchase all account receivables of the seller for immediate cash
2. Administrators the sales ledger of the seller collects the accounts
receivable.
3. Assume the losses, which may arise from bad debts.
4. Provide relevant advisory service to seller.
The main point is to be noted down in factoring is that the factor
handles all the receivable arising out of the credit sales of the
seller. Company and not just same specific bill which is mainly
done in bill discounting agreement.
NON-FUND BASE LIMITS
These are the credit facilities given by the banks where actual bank
fund are not involved e.g. letter of guarantee. Presently ISGEC is
availing these facilities only from State Bank of Patiala.
Fund base limit and non fund based limit of State Bank of Patiala are as
follows.

Fund Based
(Pledge)

Limit

DP

Outstanding
On

Sanctioned
Credit Cash

Fund based
(hypothecation
)
Cash Credit
Non fund Based

12800

9460

30.9.2012
2047.00

Limit

DP

Outstanding as
on 30.9.2012

200
154

200
154

4.95
154

Other than Bank finance company is also using the following sources to
finance its working capital:TRADE CREDIT:
ISGEC enjoys a reasonable amount of goodwill in the market. This
enables the company to get credit for longer duration and hence
postpone immediate cash outflow. The trade creditors of the company
outstanding as on 30 Sept. 2010, were amounted to Rs. 1229.00 lacs.
SECURITY FROM THE DEALERS:
An ISGEC sells its Products through the dealer, it receives some
amount from the dealers on advances as security. This security also
serves as a source of working capital finance.

CHAPTER 4
DATAANALYSIS

DEBTOR TURNOVER RATIO =

Sales / Average Debtors

Particulars
Debtors
Sales

2009-10
2010-11
2011-12
1717.27
543.32
852
1594.33
1026.90
1594.33
DEBTORS TURNOVER RATIO

YEAR

RATIO

2009-10
2010-11
2011-12

23.09
70.07
37.19

INTERPRETATION
This ratio shows how many times accounts receivable turnover during
the year converted into cash. Higher turnover ratio shows the greater
efficiency of credit management.

AVERAGE COLLECTION PERIOD =

365 / Accounts receivable turnover
At SSM average collection period for years are as follows:
YEAR
2009-10
2010-11
2011-12

RATIO
2 days
4 days
2 days

INTERPRETATION
Average collection period shows the number of days worth of credit
sales i.e. locked in debtor. An average collection period which is shorter
than the credit period allowed by form needs to interpreted or excessive
conservation in credit granting and average collection period more than
the period allowed means inefficient credit management and excessive
amount being locked in debtors. So we see that the Companys average
collection period is very low. This is because of the reason that
company sells its sugar either to Govt. or though dealer. . So very few
days are given to them for purposes. This is very good for the company.

CURRENT RATIO
CURRENT ASSETS / CURRENT LIABILITIES

Particulars
Current Assets
Current
Liabilities

2009-10
11715.94
6310.92

2010-11
12215.9.
4331.45

2011-12
15363.54
5571.17

CURRENT RATIO
YEAR
2009-10
2010-11
2011-12

RATIO
2.76
2.82
1.86

INTERPRETATION

Current ratio measures the ability of the firm to meet its current
liabilities. It shows the short-term liquidity and solvency of the firm. A
higher ratio shows the solvency of the firm but too much high ratio may
be due to the excessive level of debtors and receivables.

QUICK RATIO =

(CASH & BANK + DEBTOR + MKT. SECURITIES) /

CURRENT LIABILITIES
QUICK RATIO
YEAR

RATIO

2009-10

0.67

2010-11

0.33

2011-12

0.85

INTERPRETATION
This ratio shows the liquid or near liquid assets to meet the current
liabilities of the company. Inventories are shored from the calculation of
quick ratio as they cannot be easily converted into cash to meet the
current liabilities.

CHAPTE 5
FINDINGS

FINDINGS

Working Capital is an important part and plays a very crucial role in

the functioning of an organization. Creditworthiness or goodwill of
any company depends upon its Working Capital is an important part
and plays a very crucial role in the functioning of an organization.
Creditworthiness or goodwill of any company depends upon its
working capital ISGEC.
Good Relationship with creditors if the relations with the
creditors are good then in time of problems company can easily
get more credit from creditors
Investments in the stock have increase by 852.6 lakhs
Creditors have increased by 1238.38 lakh
Administrative and selling expenses have reduced by 695 lakhS
Advances from customers have increased by 26 lakhs.

LIMITATIONS OF THE STUDY

Every study has some limitations. Inspite of the hurdles, the training
period was a good time for learning experience but there were certain
limitations that every researcher has to face during the research period.
I too had to face certain such limitations:
1.

Shortage of time
Period of 6 weeks is not sufficient to even study the basic routine
ISGEC activities of the organisation

2.

Lack of expertise, being a fresher

3.

Difficulty in analyzing data, being a fresher.

4.

Lack of attention, support from the executives of the concerned

organisation.

SUGGESTIONS

 Company should make efforts on export.

Loans and advances should be minimize: I have seen that from
the last three years advances of the company are increasing
regularly. A lot funds in loans and advances and quick ratio is
under pressure.
This is the main reason why companys quick ration is not good.
If company minimize its loans and advances, the quick ratio
could not come under pressure and the liquidity of the company
will be improved
Payment of Creditors should be made in time
Analysis work: should be done before it is to be send to head
office
Company must avoid maximum wastage in production.

CONCLUSION

Working capital Management concerned with the problems that arise in

attempting to manage the current assets, current liabilities and the interrelationship that exists between them. The goal of working capital
management is to manage the firm's current assets and current liabilities
in such a way that a satisfactory level of working capital is maintained
to boost the production. If a company could not maintain a satisfactory
level of working capital it is likely to become insolvent.
The analysis made in INDIAN SUGAR &GENERAL ENGINEERING
COPORATION reveal that a satisfactory level of working capital is
maintained in the company. The operating cycle of the company is also
in the favourable position. The liquidity position ISGEC the company is
more than satisfactory level. So, it can easily be concluded that overall
working capital position of the company is good and company should
try to maintain more favourable working capital position

BIBLIOGRAPHY

BIBLIOGRAPHY

Working Capital Management

V.K. Bhalla

Financial Management

I.M. Panday

Annual Report

ISGEC, Yamuna Nagar

Documents and Files

Indian sugar & general

Engineering corporation,
Yamuna Nagar

Balance Sheet of ISGEC As on September 30, 2006

Sources of Funds

(Rs. in Lacs)
As on 30.9.2011

As on 30.9.2011

709.99
Shareholders Funds
Share Capital
Reserve and Surplus

10589.94
11299.93

Loan Funds
Secured Funds
Unsecured Funds

1662.51
6526.32
8188.83
1357.22
9546.05
20845.98

Deferred Tax Liability

709.99
9669.95
10379.94
6686.62
2595.28
9281.90
1464.85
10746.75
21126.69

TOTAL
APPLICATION OF
FUNDS
Fixed Assets
Gross Block
Less Depreciation
Net Block
Capital Work in
Progress
Investments
Current Assets, Loans
and Advances
Inventories
Sundry Debtors
Cash and Bank
Balances
Other Current Assets
Loans and Advances
Less: Current Liabilities
and Provisions
Liabilities
Provisions
Net Current Assets
Miscellaneous
Expenditures
(to the extent not
written off or adjusted)
Preliminary expenses

15125.69
3782.22
11343.47
1153.56 12497.03

14624.32
2827.01
11797.31
140.04

2943.41
8852.68
852.00
416.47

7005.10
543.32
3608.25

0.46
1594.33
11715.94

32.33
1026.90
12215.90

6017.20
293.72
6310.92

3738.58
542.87
4331.45
5405.02

0.52

TOTAL

20845.98

Balance Sheet of ISGEC As on September 30, 2012

SCHEDULE A
SHARE CAPITAL

(Rs. in Lacs)
As on September 30, 2011 As on September 30, 2010

Authorized
71,00,000 (Previous Year
71,00,000)
Equity Shares of Rs.10/0
each
Issued Subscribes and paid
up.
70,99,900 Equity Shares of
Rs.10/0 each

710.00

710.00

709.00

709.00

Notes : Entire Share Capital is held by the holding Company, The Saraswati
Industrial Syndicate Limited and its nominees.
SCHEDULE B
RESERVE AND SURPLUS
Share Premium
General Reserve
Profit and Loss Accounts
Balance

SCHEDULE C
SECURED LOANS
From Financial Institutions
and Banks
Term Loan from IFCI and
Banks
Cash Credit Accounts
Other Loans - from Sugar
Development Funs
Interest accrued and due

(Rs. in Lacs)
As on September 30,
As on September 30, 2010
2011
6300.00
(6300.00)
130.00
(130.00)
4159.94.00

6300.00
(6300.00)
130.00
(130.00)
3239.95

(3239.95)
10589.94

(551.84)
9669.95

(Rs. in Lacs)
As on September 30,
As on September 30, 2010
2011

22.36

2773.25

1201.51
438.64

3221.72
657.95

-1662.51

33.70
6686.62

SCHEDULE D
UNSECURED LOANS
FROM THE Holding
Company viz.The Saraswati
Industrial Syndicate Limited
ISGEC Covema Limited and
ISGEC Exports Limited
(call money and inter
corporate deposits)
Sugar Development Fund
Loan (for cane development)
Fixed deposits
SCHEDULE E

(Rs. in Lacs)
As on September 30,
As on September 30, 2010
2011
4986.04

1272.23

337.91

257.52

57.59

57.59

1144.78
1007.94
6526.32
2595.28
(Rs. in Lacs)
As on September 30,
As on September 30, 2010
2011

Fixed Assets
Gross Block
Less Depreciation
Net Block
Capital Work in Progress
Investments

SCHEDULE F
Investments
Non Trade Investment
Mutual Funds

SCHEDULE G
Inventories
Store and Spare Parts
Work in Progress : Sugar
Finished Stock : Sugar
Molasses

15125.69
3782.22
11343.47
1153.56
2943.41

As on September 30,
2011
0.60
2942.81
2943.41
As on September 30,
2011
950.36
12.90
7431.19
458.23
8852.68

14624.32
2827.01
11797.31
11937.35
1304.19

As on September 30, 2010

0.20
1303.99
1304.19
As on September 30, 2010
714.40
18.02
5774.28
498.40
7005.10

SCHEDULE H

As on September 30,
2011

As on September 30, 2010

Sundry Debtors
Debts outstanding for a period
exceeding six months
(consider doubtful)
Other debts
Less : Provision for doubtful
debt
SCHEDULE I

Cash and Bank

Balances
Cash and Cheque
in Hand
With scheduled
Banks:

1.26

1.26

852.00
-1.26

543.32
-1.26

852.68

543.32

As on September 30,
2011

As on September 30, 2010

249.35

182.18

148.51

916.14

----

0.02

18.61

2509.91

416.47

3608.25

Current Account

Stamps in
Franking Machine
and deposit with
post office
Fixed Deposits
SCHEDULE J
Other current assets
Interest Accrued on Fixed
Deposits
SCHEDULE K
LOANS AND ADVANCES

As on September 30,
2011

As on September 30, 2010

0.46

32.33

0.46

32.33

As on September 30,
2011

As on September 30, 2010

Security Deposits
Advances Recoverable in
cash or in kind or for value
to be received
Balance with excise and
customs
Claims pending with
government

SCHEDULE L
CURRENT LIABILITIES
Sundry Creditors
Advances from customers
Excise duty payable
Security and other deposits
Interest Accrued but not due
on loans
SCHEDULE M

PROVISIONS
Provision for leave
Salary
Provision for
pension
Provision for Taxnet of Advance tax
and TDS of
Rs.858.37 Lacs

34.58
1124.29

33.31
468.55

110.98

30.39

324.48

494.65

1594.33

1026.90

As on September 30,
2011

As on September 30, 2010

4747.46
65.83
718.63
76.52
408.76

2509.08
39.24
669.76
78.99
491.51

6017.20

3788.58

As on September 30,
2011

As on September 30, 2010

70.68

69.04

502.75

391.47

(279.71)

82.36

293.72

542.87