AMUL

A Presentation On Analysis Of Working Capital Management & Ratio Analysis For Kaira District Cooperative Milk Producers Union Ltd. (AMUL) Presented by Dave Girija Exam Seat No. 35 M.B.A. Semester II Anand Institute Of Management

DAIRY INDUSTRY
OVERVIEW White revolution program Operation Flood NDDB GCMMF

AMUL

INDIAS POSITION second largest milk producer average annual growth = 7% per day milk procurement = 20 million litres total 1,14,300 co-operative societies

STRENGTHS Demand absolutely optimistic Flexibility of product mix Availability of raw material

OPPORTUNITIES Value addition Export opportunity Alternative use of Milk

AMUL

SWOT ANALYSIS
WEAKNESS Perishability of product Problematic distribution Logistics of procurement Competition THREATS Milk vendors Global competition

HISTORY OF AMUL
Kaira District Co-operative Milk Producers 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

AMUL products' mascot : "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

Milk, Buttermilk, Milk Powder, Butter, Ghee and Flavored Milk

AMUL

2. Anand Plant Products

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 NUTRAMUL LASSI DAHI

ICE CREAM MILK SHAKE

BASUNDI

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.

AMUL

2. ESTA DIVISION (Establishment of accounts division) 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 Depreciation WDV Method Inventories FIFO Method Retirement, Bonus, PF, etc. Benefits Acts.

AMUL

2. 3. 4.

MARKETING DEPT.
1. 2. 3. 4. Product Price Place 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
A

03-04 3 days 26 days 39 days

04-05 5 days 23 days 121 days

05-06 5 days 34 days 118 days

06-07 6 days 32 days 78 days

07-08 6 days 32 days 192 days

Raw material conversion period Work-in-progress conversion period Finished goods conversion period

AMUL

Debtors conversion period

36 days

50 days

37 days

28 days

30 days

GROSS OPERATING CYCLE GOC = A+B+C+D

E

104 days 44 days

199 days 39 days

194 days 35 days

144 days 34 days

260 days 29 days

Creditors conversion period

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

OPERATING CYCLE

300 250
DAYS

260 231 199 160 104 60 194 159 144 110

GOC NOC

200 150 100 50 0

AMUL

2003-04 2004-05 2005-06 2006-07 2007-08

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
2003-04 16106.2 18596.49 18990.94

FA
9588.26 6107.85 4968.66

CA:FA
1.68 3.05 3.82

NET PROFIT
252.46 311.23 323.74

NET SALES
54088.29 59459.07 70206.23

PROFITABILITY
0.47 0.52 0.46

AMUL

2004-05 2005-06

2006-07
2007-08

19874.21
28995.9

5371.69
6122.97

3.70
4.74

411.5
451.51

81631.69
107187.29

0.50
0.42

INTERPRETATION
High CA/FA ratio indicate higher liquidity Minor fluctuations in profitability Conservative policy

WORKING CAPITAL REQUIREMENT

Particulars A CURRENT ASSETS 1. Stock 2. Debtors 3. Prepaid expenses & advance 4588.81 5366.06 443.29 5708.04 Total (A) 16106.2 7662.36 8228.99 768.89 2219.70 18596.49 9671.26 7130.26 793.72 1395.69 18990.94 9077.90 6388.23 679.97 3728.11 19874.21 15737.88 8863.31 1083.49 3311.22 28995.9 03-04 04-05 05-06 06-07 07-08

AMUL

4. Cash and bank balance

CURRENT LIABILITIES
1. Creditors 2. Outstanding expenses 3. Deposits Total (B) 5800.8 747.58 230.08 6778.4 9327.74 7.54 9335.28 4543.47 768.89 163.81 7933.20 10663.29 55.36 10718.65 7588.45 955.75 347.39 8891.59 10109.34 69.20 10178.54 9975.10 1076.90 380.71 11432.71 8441.50 673.83 9115.33 11980.68 1423.59 168.24 13572.51 15423.39 319.90 15743.29

C D E

NET WORKING CAPITAL (A-B) ADD CONTINGENCY MARGIN (PROVISION) TOTAL WORKING CAPITAL REQUIRED

FINANCIAL RATIO SUMMARY

PARTICULARS CURRENT RATIO QUICK RATIO CASH RATIO NWC RATIO DEBT EQUITY RATIO 2003-04 2.38 1.7 0.842 0.976 6.87 7.87 5.47 10.08 5.64 3.36 2.05 5.8 2004-05 LIQUIDITY RATIO 2.34 1.37 0.280 1.078 LEVERAGE RATIO 6.09 7.09 ACTIVITY RATIO INVENTORY TURNOVER DEBTORS TURNOVER RATIO NA TURNOVER RATIO CA TURNOVER RATIO TA TURNOVER RATIO WC TURNOVER RATIO 5.71 7.23 9.73 3.20 2.35 5.58 PROFITABILITY RATIO GROSS PROFIT RATIO NET PROFIT MARGIN NOPAT MARGIN ROE ROTA RONA 39.16 0.47 2.5 7.89 5.13 14.1 41.87 0.52 1.95 9.01 4.59 18.9 38.41 0.46 1.63 8.62 4.65 22.4 37.25 0.50 1.39 9.75 4.39 20.8 35.46 0.42 1.2 9.83 3.59 20.7 5.38 9.58 14.13 3.7 2.85 6.95 6.00 12.78 15.20 4.11 3.17 9.67 6.10 12.09 17.51 3.7 2.99 6.95 4.03 5.03 1.86 2.86 4.95 5.95 2005-06 2.14 1.05 0.176 1.254 2006-07 1.79 0.95 0.326 1.493 2007-08 2.14 0.98 0.244 1.162

AMUL

CAPITAL EQUITY RATIO

EVALUATION OF AMULS EARNING POWER

Particulars Net Asset turnover ratio GP Margin Formulae Sales NA GP * 100 Sales EBIT GP EBIT Sales EBIT * 100 NA PAT * 100 EBIT NA NW PAT * 100 NW RE PAT RE * 100 NW 2003-04 5.64 39.16 0.0638 2.5 14.1 0.19 3 2004-05 9.73 41.87 0.047 1.95 18.9 0.27 1.77 2005-06 14.13 38.41 0.0413 1.63 22.4 0.29 1.32 2006-07 15.20 37.25 0.037 1.39 20.8 0.37 1.27 2007-08 17.51 35.46 0.033 1.2 20.7 0.36 1.33

AMUL

Operating Leverage NOPAT Margin RONA DFL Financial Leverage

ROE
Retention Equity Growth

7.89
0.76 5.97

9.01
0.8 7.26

8.62
0.93 8.04

9.75
1.13 11.07

9.83
0.82 8.05

ANALYSIS OF EARNING POWER 20.7 20.8

22.4 18.9 14.1 7.89 5.97 9.01 7.26 8.62 8.04

11.07 9.75

9.83 8.05

RONA ROE EQUITY GROWTH

AMUL

2003-04

2004-05

2005-06

2006-07

2007-08

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 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.

AMUL

FINDINGS
From ratio analysis the following conclusions can be drawn-

AMUL

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 liquidity AMUL has sufficient net working capital in last year so it indicates good position in order to meet companys 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 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

AMUL