Professional Documents
Culture Documents
THE STUDY OF
WORKING CAPITAL SCENARIO
AT
NEW DELHI
Submitted By:
SWATI VIJAY
PGDM
2004-2006
And all the above statements made by the candidate are correct to the best of
our knowledge and belief.
Signature
Mr. Inderneel Deb
(Dy. Manager, Banking & Treasury Operations)
Table of Contents
Sr. No CONTENTS
1). Acknowledgement
9). Conclusion
11). Annexure
12). Bibliography
ACKNOWLEDGEMENT
A project of this nature calls for intellectual nourishment,
professional help and encouragement from many quarters.
(SWATI VIJAY)
COMPANY PROFILE
RELIANCE ENERGY LIMITED
BSES DELHI
In July 2002, Delhi Vidyut Board unbundled into five
successor entities the three distribution companies, a
transmission and a holding company. Two of the three
distribution companies have been handed over to BSES, and
one to TATA POWER.
As a part of its active support to the privatization process,
BSES has recently acquired an equity stake of 51% in two of
the three Distribution Companies of Delhi after unbundling
and privatization of the erstwhile Delhi Vidyut Board. The
two distribution companies, BSES Rajdhani Power
Limited covering South and West areas and BSES
Yamuna Power Limited covering Central and East
regions provide electricity to around 23 lakhs consumers
spread across an area of 1000 sq kms (approx).
Consumer Profile
Category Central-East
LIP (Large 310
Industrial Power)
SIP (Small Industrial 26416
Power)
Non-Domestic 173248
Domestic 660866
Agriculture 341
Railways 0
Water 43
Public Lighting 1
Category South-West
LIP (Large
Industrial Power)
SIP (Small Industrial 19802
Power)
Non-Domestic 100062
Domestic 717273
Agriculture 11173
Railways
Water
Public Lighting
Analysis Technique
ACTUAL STUDY
Working capital management is management for the short-
term. It is concerned with the problems that arise in
attempting to manage the current assets, the current
liabilities and the interrelationship that exists between
them. This is of critical importance to BSES.
The faster a business expands, the more cash it will need for
working capital and investment. The cheapest and best
sources of cash exist as working capital right within
business. Good management of working capital will
generate cash will help improve profits and reduce risks.
Bear in mind that the cost of providing credit to customers
and holding stocks can represent a substantial proportion of
a firm's total profits.
Conservative
Aggressive
Sales Level
A B C D E F G H
Cash Cheques
Any firm will like to hold higher levels of inventory. This will
enable the firm to be more flexible in supplying to the
customers and will find ease in its production. Most of the
customers may require immediate delivery and higher
inventories may help meeting their demands and hence
there would be less and fewer chances of transmission of
power being disrupted. But there is always a cost involved
in the inventories. This cost includes the capital cost of the
stock and the costs of storing and the carrying etc. on the
other hand, holding lower level of stock than required may
result in stock outs. The cost of stock out may be sales loss
or customers dissatisfaction. The stock outs may also result
in delays or hold-ups in the transmission process.
REORDER POINT:
BSES determines the reorder point for each level of
inventory, using SAP. It is that level of inventory when fresh
order is placed with the suppliers for procuring additional
inventory equal to the economic order quantity.
MATERIAL PLANNING:
The Material Planning comprises of:
Material Inspection.
B. Material Inspection
Receiving of quality plan from supplier for approval.
CONTRACT PROCESS:
Step 1: Contract Formulation and Awarding.
MATERIAL PROCUREMENT:
Procurement Process.
A Purchase Requisition
B Procurement Process
Vendor Evaluation and selection:
The following steps are involved in the process:
Expediting Cell:
The main objective of the expediting cell is to ensure that
the fabrication is done as per specifications, the quality
parameters are met and the delivery is made within the
time specified in the PO. Follow-up is also done in those
cases where fabrication is not involved.
Process Description:
NORMAL RECEIPTS:
Vendor sends the material along with the invoice and
copy of the Purchase Order.
NORMAL ISSUE:
SAP Processing In case of Summer scheme and other
operational and maintenance contract)
JOB COSTING:
The capitalization process begins at the time of receipt
of the completion report from the site manager.
COLLECTION PROCESS
1. Daily Summary
2. Daily Summary circle wise
3. Daily Cheque/ DD statement
4. Circle wise summary
(i) DAT.file
Collection details per consumer in digital
mode circle wise.
(ii) PRN file
i. Bill Junction
ii. Bill Desk
2. DOCUMENTATION
2.1 Records Maintained At Collection Centres
(d) Annexure I
Date
Total Amount
Counter No. allocated (to cover the
days cases of receipt through drop
box).
No. of Cheques
(d) Annexure I
(b) Annexure - I
1st - CPC
2nd - Central Circle
3rd - Retained (File Copy)
3. Circle Summary
5. Miscellaneous
d) Key Register
e) Pay-in-slip Register
(i) POS.dat
(ii) POS.txt
(iii) SFS.dat
Circle wise collection details relating to SFS
Drop Box maintained through Skypack in
digital mode.
(iv) SFS.txt
(v) EBL.dat
(vi) EBL.txt
(vii) BJR.dat
(viii) BJR.txt
(ix) BDK.dat
(x) BDK.txt
Company wise collections by Bill Desk are
recorded.
(xi) Summary.txt
4. Dishonour Lists
Domestic Connections
LIP- Large Industry Power.
SIP- Small Industry Power.
Commercial- e.g. new connection, meter change etc.
Consumers against theft billing
Bill System
1. SKYPAK-
All stubs are sent to CPC physically on the second day and
the data is e-mailed.
WORKING AT CPC
NIGHT SHIFT
DAY SHIFT
For Cheques
The cheques sent in the night to CPC are verified and pay
slips are prepared. So the entry for the same is passed.
(ANNEXURE)
(ANNEXURE)
BANK
PERCENTAGE
1) SBI 30%
2) Bank Of Baroda 20%
3) IDBI Bank 10%
4) Federal Bank 10%
5) Punjab National Bank 10%
6) Corporation Bank 10%
7) Bank Of Punjab 10%
Here, SBI is the Lead Bank. Some of the ground rules for
lending under Consortium arrangement are:
Maximum of 10 banks in case of Fund based working
capital limits upto Rs. 100 crore and 15 banks in case
of limits upto Rs. 100 crores.
Minimum share of each bank should be 5% of Fund
based Credit limits or Rs. 5 crore, whichever is more.
Borrower should obtain NOC from the leader before
approaching the new bank.
Lead Bank levies service charges.
The borrower should not obtain any additional banking
facility or open current accounts or obtain bill limits,
guarantees / acceptance, letter of credit etc. from non-
member bank , without the concurrence of the lead
bank.
Each member to decide its own Credit rating and rate
of interest.
Non Fund based limits should be shared in the same
proportion as the Fund based limits in the consortium.
COMPARATIVE
BALANCE SHEET
ANALYSIS, COMMON
SIZE STATEMENT &
COMPARATIVE RATIO
ANALYSIS
(BYPL & NDPL)
BYPL i.e. BSES Yamuna Power Limited and NDPL i.e. North
Delhi Power
Limited are two of the three power distribution companies
in Delhi, the other being BSES Rajdhani Power Limited.
1) Current ratio:
Formula: Current assets/Current liabilities.
The ideal ratio is 1:1. The Liquid ratio for BYPL is less than
the ideal ratio of 1:1 for all the 3 years. This is not much of
the problem for BSES as its transactions with the suppliers
of power are on credit. Also the collections efficiency of the
company has improved, so the company does not have much
liquidity problem. The Liquid ratio of NDPL is also on a
decline which shows that company is moving towards
the ideal.
This ratio indicates the liquidity of the inventory, that is, the
number of times, on an average, the inventory was utilized
during the accounting year and consequently use of
inventory for debt-paying purposes. This ratio is a useful
indicator of the management performance.
NDPL has done better than BYPL in all the 3 years, reason
being low levels of inventory.
Another useful way to evaluate how inventory management
is done in the concern is to look at the average period for
which inventory is being held.
Average Holding period: Average holding period of
inventory can be calculated by dividing the number of days
in a year (365) by inventory turnover ratio.
The aggregate Profit before tax (PBT) was Rs. 179 crore, as
against Rs. 149 crore in the previous year, an increase of
20%.
GENERAL EVALUATION
Less: Transferred to Profit & Loss Account 14.90 16.50 10.80 15.78
Deferred Tax Liability (Net) 118.40 64.06
Total 1,737.10 1,382.17
APPLICATION OF FUNDS
Fixed Assets 4
EXPENDITURE
Less: Transferred to Profit & Loss Account 10.44 10.95 6.53 9.64
Deferred Tax Liability (Net) 35.48
Total 814.94 506.52
APPLICATION OF FUNDS
Fixed Assets 4
www.rel.co.in
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Rs.'in
Cash flow from operating activities Crores'
3/31/05 3/31/04
4
7
.
7
6
Profit before Taxation 54.65 54.65 47.76
Adjustments for :
3
1
.
9
6
Depreciation 42.36
Interest and finance charges
0
.
0
5
Investment income (0.16) 42.19 32.01
Operating Profit before working capital changes 96.85 79.77
Adjustments for :
(
6
6
.
8
3
Trade and other receivables )
(
1
1
.
4
4
Inventories )
(
9
4
.
8
3
SVRS )
8
5
.
3
5
Trade payables 0.00 (87.75)
Net cash from Operating Activities 96.85 (7.98)
Cash flow from investing activities :-
(
7
3
.
1
1
Purchase/acquisition of fixed assets )
Depreciation Adjustment on Sale of Assets (0.01)
(
0
.
5
9
Purchase of investments )
(
4
0
.
4
5
Loans and deposits ( non-trade ) ( net ) )
(
0
.
0
5
Investment income 0.16 )
1
4
4
.
7
7
Secured/Unsecured Loans/ Grant 0.15 30.57
Net Cash used in investing Activities 0.15 30.57
0
.
0
0
Interest and finance charges paid 0.00 0.00 0.00