atul ltd.(gaurav shah)

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A Project Report On THE STUDY OF WORKING CAPITAL MANAGEMENT Prepared at:

ATUL LIMITED

Project Report OnA member of Lalbhai Group

(Aromatics Division)

The Study of Working Capital Management Of Atul Ltd

A member of Lalbhai Group

Our MissionWe are a chemical company committed to creating wealth for all our stakeholders. We will strive for leadership in our chosen products and markets by providing high quality products and services to our customers. We will seek profitable growth by innovative application of science and technology. We will pursue excellence in all that we undertake and take steps to continuously improve. We will take responsible care of the environment around us and improve the quality of life in the communities we operate in.

Board of DirectorsThe Board of Directors of Atul Ltd consists of eminent industrialists and professionals whos Chairman is Arvind Lalbhai. Sunil S Lalbhai is the MD & CEO, Samveg Lalbhai is the MD and Jagdish L Shah is the Executive Director. Board of Directors Name Mr A N Lalbhai Status Nonexecutive Chairman Managing Director & CEO Executive Director Independent Nonexecutive Director Chairman Bombay Dyeing & Manufacturing Co Ltd Occupation Chairman, Arvind Mills Ltd

Mr S S Lalbhai

Mr J L Shah Mr N N Wadia

Mr G S Patel

Independent Former NonChairman Unit executive Trust of India Director Independent Nonexecutive Director Former Chairman & CEO ICI Companies in India

Dr S S Baijal

Mr B S Mehta

Independent Partner Bansi S NonMehta & Co executive Director Independent Former

Mr H S Shah

Nonexecutive Director

Chairman & Managing Director Indian Petrochemicals Corporation Ltd

Mr S A Lalbhai

Managing Director Independent Nonexecutive Director Independent Nonexecutive Director Independent Nonexecutive Director Sr Partner of M/s Crawford Bayley & Co., Mumbai Former Chairman Hindustan Lever Ltd

Mr S M Datta

Mr K Aparajithan

Mr R A Shah (Alternate Director)

INDEX

Sr. No1 2 3 4 5 6 7 8 9 10

Description Chemical industry Outlook Over view of Atul Ltd Over vie w of Aromatic Division Human Resource Department Production Department Marketing Department Finance Department Quality Department Objective Of The Study Working capital Management Inventory Management Cash Management Receivable Management Working Capital Finance Findings Recommendation Bibliography Balance Sheet

11 12 13 14 15 16 17 18

Chemical Industry Outlook The Indian Chemical Industry has grown at a CAGR of 8% during the period from 2001 to 2005. The industry in India is fragmented with few large companies. There are over 6,600 chemical manufacturers & capacity utilization of Indian plants is lower at 70%, when compared to that of China and Japan where it is higher at 85-90%. The sector is a cyclical, capital-intensive where pricing power of the players is under constant threat. Several bilateral Free Trade Agreements (FTAs) with various ASEAN countries have been concluded or are under negotiations. These are aimed at phasing out trade barriers to create a regime of free trade and this may increase the pricing pressure on the Indian Chemical Industry. The bulk chemicals business segment continues to be cyclic in nature. However, the automobile and electronic sectors are witnessing growth and this affords an opportunity for the newer intermediaries' business segment and Indian epoxy market is also growing rapidly. The key success factors pertaining to the industry are economies of scale, product quality and reliability and development of new products and application processes.

Industry analysisThe Chemical industry constitutes an important segment of the chemical industry in India. The Indian Chemical industry is today totally self-sufficient with a majority of its inputs manufactured locally. India is currently producing all varieties of synthetic Chemicals and intermediates and has a small presence in the natural Chemical. The subcontinent has emerged as a global supplier of Chemicals and dye intermediates, particularly for reactive, acid, vat and direct dyes. The market for Chemical is dependent on textiles, in particular demand for polyester and cotton determines the demand for certain types of Chemicals. The textile industry is currently buoyant and the market is growing steadily. There is a shift in the usage of polyester and polyester blended fabrics and as a result demand for disperse dyes are at a peak.

Market Size and Major PlayersThe market size of the Indian Chemical industry is INR141 billion including the exports of INR52 billion in 2004-05. The exports doubled from INR26 billion 20000'l to INR52 billion in 2004-05. By 2010, the exports are expected to reach INR121 billion. India currently produces 1,30,000 tonnes and 75% of the production is exported to 15 countries like: the USA, Germany, Netherlands, Italy, UK, Spain, Turkey, Switzerland, Indonesia, Korea, Hong Kong, Thailand, Singapore, Japan and Taiwan. The per capita consumption in India is very low 50gm compared to the world average of 400 gm. Textile, cotton and polyester consume more dye compared to the other fabrics and in turn, the growth of disperse, direct and reactive dyes is expected to increase due to the usage of these intermediates in cotton and polyester. By 2010, the contribution of India in the Global Chemical market is expected to reach 810% with an increase of 20% per annum. The major players in the organized sector are Atul Products, Jaysynth Dyechem, Meghmani Organics, Colortex, Sudarshan Chemicals, Colour Chem, Ciba Speciality, BASF, Clariant India, IDI and Metrochem. The Indian companies account for 6% of the world dye production.

Opportunities: Constant technology up gradation to provide value added products: Technology is the key to manufacturing and the Indian industry is fragmented with very few players handling the organized sector that is expected to grow. Enhanced quality of products at reduced prices: The Indian manufacturers have to concentrate on the quality of products at competitive prices in order to compete with leading countries like China, Japan, Indonesia and HongKong. The developed countries production share in the market has reduced from 65% to 50% and is expected to further reduce in the future. The adoption of technology will increase the quality of products and production. Improve economies of scale: Due to five decades of expertise in the Chemicals industry, players operating in the field must adopt economies of scale to compete with other countries. Product and service differentiation Develop world class Infrastructure International trade procedures to be implemented Build Indian brand image overseas

Developed countries are looking at outsourcing dyes from developing countries due to more and more production facilities are being shifted to Asian countries like India and China. The key success factors pertaining to the industry are: Economies of Scale Products quality and reliability Development of new products and application processes

Background of the companyAtul Limited, incorporated in the year 1947 by Mr. Kasturbhai Lalbhai in technical collaboration with American Cyanamid of USA, is engaged in manufacturing of Chemicals, agro chemicals, intermediates, polymers, 'Aromatics, Pharmaceuticals, bulk drugs and specialty chemicals. It is one of the oldest chemical company in the country. The plant of AL is located at Atul in an area of 1243 acres. At present, the company is manufacturing more than 300 products which are mainly used in various industries viz. agriculture, fragrance & flavours, tyre, textiles, paper, Pharmaceuticals, aerospace, construction, paints etc. The Company has mainly six activities viz. Agrochemicals, Aromatics, Bulk Chemicals & Intermediates, Colours, Pharmaceuticals & Intermediates, and Polymers, functioning independently as profit center.

Executive SummaryManagement Atul Ltd. belongs to the Lalbhai Group. The company is managed by a team of professionals headed by Mr. Sunil S Lalbhai, who is the Managing Director & CEO of the company. Mr. Sunil Lalbhai has been associated with the chemical industry for over two decades and has guided the company through the structural changes that the chemical industry has undergone during this period. The senior management includes four Presidents holding professional degrees in chemical engineering. The management has been able to proactively change the product mix of the company over years and have been able to sustain the growth of the company during the lean periods that the chemical industry has passed through during the last decade. The promoters are professional and are forward looking and are likely to lead the company to achieve the budgeted results. The company has successfully absorbed technical know-how through its various joint ventures and has been able to carry on the respective businesses profitably

Business Model and Competitive Analysis Atul Ltd. is a pioneer in the Chemicals industry and has over five decades of experience in the chemicals industry, which has helped the company to sustain itself through several business cycles. The Company has focused on R&D in order to develop new products and applications and has diversified its product portfolio away from Chemicals over the years. Chemicals now contribute only 33% to the turnover of the company.

The company is now in the process of moving up the value chain in each of its business lines. The company has acquired technology for manufacturing phosgene-based agrochemicals where the margins are high. It plans to focus on formulations in agrochemicals where the margins are even better. It has commenced manufacturing Chemicals with higher margins incl