report of working capital at alembic ltd
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A
COMPREHENSIVE PROJECT REPORT
ON
“WORKING CAPITAL”
Submitted to
Dr. J. K. Patel Institute of Management
IN PARTIAL FULFILLMENT OF THE
REQUIREMENT OF THE AWARD FOR THE DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
Under
Gujarat Technological University
UNDER THE GUIDANCE OF
Faculty Guide
PROF. DEVAL NIRMAL
Submitted by
JIMIT M PATEL
Enrollment No.:107110592130
M.B.A - I, SEMESTER-II
Dr. J. K. Patel Institute of Management
M.B.A PROGRAMME
Affiliated to Gujarat Technological University
Ahmadabad.
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Dr. J. K. Patel Institute of Management
CERTIFICATE
This is to certify that Mr. JIMIT M PATEL, students of Master of Business
Administration (Batch 2010-2012) at Dr. J. K. Patel Institute of Management,
Vadodara have undertaken a Project Titled “WORKING CAPITAL” in partial
fulfillment of 2 years full time MBA programme of Gujarat Technological
University, Ahmedabad. The Summer Internship Project has been undertaken
under the guidance of Prof. DEVAL NIRMAL, faculty of Dr. J. K. Patel
Institute of Management.
This is also to ascertain that this project has been prepared only for the award of
Master of Business Administration degree and has not been submitted for any
other purpose.
Prof. Dr.Abhijeet Chatterjee
Deval Nirmal Director
Date:
Place:
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PREFACE
Summer Placements are a crucial aspect of a Management student’s life. At the MBA
Programme conducted under the aegis of Gujarat Technological University, Ahmadabad,
summer placements aim to give the students a chance to apply in actual practice, the
fundamentals that they learnt in the first two semester of the programme. Graduate students
with no or minimal work-experience step into an organisation and get their first taste of
working life. The students get an exposure to all the four functions of management – human
resources, finance, marketing and production. This enables students to choose or rather,
reject a specialization, e.g., the student may have scored well in Marketing Management in
the exams, but when confronted by the realities of the marketing professionals, the student
will understand exactly where he stands and what he lacks, in terms of his marketing skills.
In this report on my summer placement at ALEMBIC LTD., I have presented my
understanding of the working of Alembic Ltd., from a management-student’s perspective.
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ACKNOWLEDGEMENT
I am thankful to Dr. ABHIJEET CHARTIJEE, Director, Of J.K.PATEL INSTITUTE OF
MANAGEMENT for giving me an opportunity to work with ALEMBIC LIMITED for my“Summer Internship Project”.
This report would not have been possible but for the kind support and expert guidance of Mr.
Himanshu Jani (Senior HR. Manager) & Mr. Rajkumar Baheti (President Finance).The task
of understanding the intricacies of management in practice was made easy by the generous
help extended by all the employees of Alembic Ltd.
I am also thankful to Prof. Deval Nirmal for him valuable advice and ideas which made my
work successful. Without her encourangement I would not have been able to complete my
project.
No Task is a single man’s effort cooperation and coordination of various people at various
places goes into successful implementation. It is great pleasure to have the opportunity to
extend my heart-felt thanks to everybody who helped me through the successful completion
of this project.
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TABLE OF CONTENTS
Sr.NO CONTENTS PAGE
NO
1 PREFACE 3
2 ACKNOWLEDGEMENTS 4
3 LITERATURE REVIEW 7
4 OBJECTIVE OF STUDY 19
5 INTRODUCTION OF ALEMBIC LTD. 22
6 FINANCE DEPARTMENT 37
7 RESEARCH METHODOLOGY 41
8 DATA ANALYSIS 43
9 FINDINGS & OBSERVATION 60
10 SUGGESIONS 62
11 LIMITATION OF STUDY 61
12 CONCLUSION 63
13 BIBLIOGRAPHY 64
14 ANNEXTURE 65
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TABLE OF CHART
Sr.NO CONTENTS PAGE NO
1 CURRENT ASSETS 46
2 DEBTORS 47
3 INVENTORY 48
4 LOANS & ADVANCES 49
5 CASH & BANK BALANCES 50
6 CURRENT LIABILITIES 51
7 PROVISIONS 52
8 NET WORKING CAPITAL 53
RATIOS 54
1 CURRENT RATIO 54
2 QUICK RATIO 55
3 WORKING CAPITAL
TURNOVER RATIO
58
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LITERATURE REVIEW
Review
A literature review can be a precursor in the introduction of research paper, or it can
be an entire paper in itself, often the first stage of large research projects, allowing the
supervisor to ascertain that the student is on the correct path.
A literature Review is a critical and in depth evaluation of previous research. It is a
summary and synopsis of a particular area of research, allowing anybody reading the paper
to establish why you are pursuing this particular research program. A good literature review
expands upon the reasons behind selecting a particular research question.
WORKING CAPITAL MANAGEMENT:-
Working capital management involves the relationship between a firm's short-term assets and
its short-term liabilities. The goal of working capital management is to ensure that a firm is
able to continue its operations and that it has sufficient ability to satisfy both maturing short-
term debt and upcoming operational expenses. The management of working capital involves
managing inventories, accounts receivable and payable, and cash.
Working capital management is concerned with the problems that arise in attempting to
manage the current assets and current liabilities & the inter-relationship that exist between
them.
The term current assets refers to those assets which in the ordinary course of business can be,
or will be turned into cash within one year without undergoing a diminution in value &
without disrupting the operations of the firm. The major current assets are cash, marketable
securities, accounts receivables and inventory.
The term current liabilities are those liabilities, which are intended at their inception to be
paid in the ordinary course of business, within a year, out of the current assets or earning of
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the concern. The basis current liabilities are accounts payable, bill payables, bank overdraft
& outstanding expenses.
The goal of working capital management is to manage the firm’s current assets & current
liabilities in such a way that satisfactory level of working capital is maintained. The current
assets should be large enough to cover its current liabilities in order to ensure a reasonable
margin of safety. “The interaction between current assets & current liabilities is therefore, the
main theme of the theory of working capital management.”
CONCEPT OF WORKING CAPITAL:-
There are two concepts of working capital.
1. Gross Working Capital
2. Net Working Capital
GROSS WORKING CAPITAL
The term “gross working capital” also referred to as working capital, means the total current
assets.
Gross working capital refers to the firm’s investment in current assets. Current assets are the
assets which can be converted into cash within an accounting year and include cash, short
term securities, debtors (accounts receivables or book debts), and bill receivables and stock
(inventory).
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Working Capital Financing in Alembic Ltd.
In Alembic Ltd, working capital planning is done by the finance Manager. The working capital planning
is done on four occasions i.e. Yearly, Monthly, Weekly and Daily basis. First the total
working capital requirement is assessed on yearly basis. On the basis of yearly planning, the
company approaches its bankers for increase or modifications in the working capital
facilities. Then the company makes the monthly working capital planning. This is done to
meet the working capital requirement of the coming month. Then the company makes a
working capital planning for the immediate week. Up to this level the working capital
planning is done by the finance manager. Then, on every evening he makes the financial
requirement of the next day and assign the execution of those works to the Accountant and
officers.
The data required for planning in Alembic Ltd Are as follows.
Yearly projected sales:-
The data is given by Managing Director and Marketing Manager to the Finance Manager.
Expansion plan of management.:-These data is given by the Managing Director and Directors.
Monthly projected sales.:-
This data is given by marketing manager to the Finance Manager
Monthly estimated purchase:-
.This data is given by Production Manager to the Finance Manager.
Monthly estimated salary, power bill , repair and maintenance and other directand indirect expenses.
This data is given by Production Manager to the Finance Manager.
Monthly estimated money receivable from debtors.:-
This data is given by Accountants to the Finance Manager.
Monthly estimated money payables to creditors.:-This data is given by Accountants to the Finance Manager. If there are much deviation in the
financial requirements during the year due to unexpected receipt of goods purchase orders
and increase in sales or change in credit terms, the yearly working capital requirement is
reviewed and modified. Accordingly monthly working capital planning is also changed.
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Operating Cycle Of Alembic Ltd.
Operating cycle of Working Capital
In any organization current assets are financed by current liabilities but all current assets cannot
be financed by current liabilities therefore there is need to maintain net working capital.
Why net working capital is needed can be understood by following cycle:
Operating cycle consists of four phases:
Utilization of cash by procurement of raw material
Conversation of raw material into finished goods.
Sale of finished goods to customers.
Collection of many from customers.
cash
Raw
materials
Finishedgoods
Debtors
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There is time lad between two successive phases. Procurement of raw material need some time
called as lead time. It can be short or long depends on availability of material. Each product has
processing time while converted from raw material to finished goods. Finished goods can reach to
customers by sales efforts lacks of proper sales efforts can lead to accumulation of inventory of
finished goods.
Realization of cash against the finished goods depends on time taken by the cycle to operate more
time to operate this cycle; more working capital is needed.
Average inventory
1) Inventory period = ------------------------------------------------
Annual COGS / 365
Average accounts receivable
2) Accounts receivable periods = ----------------------------------------------------
Annuals sales / 365
Averages accounts payable
3) Average payable periods = -----------------------------------------------------
Annual COGS / 365
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Operating Cycle of the Alembic Ltd.
NO. Particular Mar-
08
Mar-
09
Mar-
010
1 Raw material
storage Period
(Days)
29 14 10
2 Conversion period(Days)
9 8 21
3 Finished goods
storage (Days) 22
17 10
4 Advance collection
period (in Days)
9 7 23
5 Advance payment
period (in Days)
31 26 21
Length of
Operating Cycle
(Days) =
(1+2+3+4+5)
100 72 85
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NET WORKING CAPITAL
Net working capital refers to the difference between current assets & current liabilities.
Current liabilities are those claims of outsiders which are expected to mature for payment
within an accounting year and include creditors (account payables), bills payables and
outstanding expenses.
Working capital, also known as net working capital or NWC, is a financial metric which
represents operating liquidity available to a business
Working Capital = Current Assets − Current Liabilities
Net working capital can be positive or negative.
A positive working capital will arise when current assets exceed current liabilities.
A negative working capital occurs when current liabilities are in excess of current assets.
The liabilities of a business firm are measured by its ability to satisfy short term. The three
measures of a firm’s over all liability are:
1. Current Ratio
2. Acid Test Ratio / Quick Ratio
3. Net Working Ratio
Ratio analysis is a powerful tool of financial analysis. Ratios are calculated from current year
numbers and are then compared to previous years, other companies, the industry, or even the
economy to judge the performance of the company. Ratio analysis is predominately used by
proponents of fundamental analysis.
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Sources of Additional Working Capital
Sources of additional working capital include the following:
Existing cash reserves
Profits (when you secure it as cash!)
Payables (credit from suppliers)
New equity or loans from shareholders
Bank overdrafts or lines of credit
Long-term loans
If you have insufficient working capital and try to increase sales, you can easily over-stretch
the financial resources of the business. This is called overtrading. Early warning signs
include:
Pressure on existing cash
Exceptional cash generating activities e.g. offering high discounts for early cash payment
Bank overdraft exceeds authorized limit
Seeking greater overdrafts or lines of credit
Part-paying suppliers or other creditors
Paying bills in cash to secure additional supplies
Management pre-occupation with surviving rather than managing
Frequent short-term emergency requests to the bank (to help pay wages, pending receipt
of a cheque).
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DETERMENTS OF WORKING CAPITAL
A firm should plan its operation in such a way that it should have neither too much nor too
little working capital. The total working capital requirement is determined by a wide variety
of factors. These factors however affect from enterprise differently. They also vary from time
to time. In general the following factors are in valued in a proper assessment of quantum of
working capital management.
General nature of business
The working capital requirements of an enterprise are basically related to the conduct of
business.
The nature of their business is such that they have to maintain a sufficient amount of cash,
inventories and bad debts. They have necessarily to invest proportionately large amounts in
working capital. The manufacturing enterprise in a sense between these two extremes. The
industrial concerns fairly large amount of working capital through it varies from industry
depending on their assets structure.
Production cycle
Another factor which has a bearing on the quantum of working capital is the production cycle. The
term production or manufacturing cycle refers to the involved in the manufacturing of goods. It
covers the time span between the procurement of raw material and the completion of the
manufacturing process of manufacturing. In other words, there is some time gap before raw
materials becomes goods.
Business cycle
The working capital requirements are also determanined by the nature by the business cycle.
Business fluctuation lead to cyclical and seasonal changes which in cause a shift in the
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working capital position, particularly for temporary working capital requirements. The
variations in business condition may be in larea direction: Upward.
Phase when boom condition prevail and downsizing phase when the economic activity the
need for working capital is likely to.
Grow to cover the between increase sales and receipt of cash as well as to finance purchase
of addition material to the expansion of the level of activity.
In brief, business fluctuations the size of working capital mainly through the effect on
inventories. The responses of inventory to business to nature of the business cycle.
Production policy
The quantum of working capital is also determined by production policy. In case of business
the demand for produces is seasonal that is they are purchased during certain month of the
year. What kind of production policy should be follow in such assets? There are two options
open to such enterprise: either they confine their production only to periods when goods are
purchased or they follow a steady production policy throughout the year and produce goods
at a level to meet the peak demand. In the former case, there are serious production problem.
Credit policy
The credit policy relating to sales and purchase also affects the working capital. The credit
policy influences the requirement of working capital in two ways.
-through credit terms granted by the firm to its customers buyers of goods.
-Credit terms available to the firm from its creditors.
The credit terms granted to customers have a bearing on the magnitude of working capital by
determining the level of book debts. The credit sales result in higher book debts. Higher book
debts mean more working capital on the other, if liberal credit terms are available from the
suppliers of goods the need for working capital is less. The working capital requirements of a
business are thus affected by the terms of and sales and the role to the credit by a company in
its dealing with creditors and debtors.
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IMPORTANCE OF WORKING CAPITAL
Working capital is the life-blood and controlling nerve centre of a business.
It helps in forming important business strategies. Working capital helps to properly
manage and be flexible in taking important business decisions.
The adequacy of working capital contributes a lot in raising the credit standing
and always helps to take the advantage of any favorable opportunity e.g. purchasing raw
materials at a discount with minimum credit period.
Working capital is significant parameter in determining the performance of an
operating division or assessing the health of the project.
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PRAFOMA STATEMENT OF WORKING CAPITAL
Sr. No Particulars Amounts
(Rs)
A Current Assets, Loan & Advances
(a) Investment ---------
(b) Sundry Debtors -----------
(c) Cash & Bank Balances -----------
(d) Other current assets -----------
( e) Loans & Advances -----------
Total of “A” ----------
Less
BCurrent liabilities & Provisions ---------
(a) current liabilities ---------
(b) Provisions ---------
Total of “B” --------
Net Working Capital (Total of A-B ) ----------
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OBJECTIVE OF STUDY
My Project Report mainly focuses on “Working Capital”
To determine the amount of working capital requirement and to calculate various ratios
relating to working capital.
To make an item wise study of the components of the working capital.
To suggest the steps to be taken to increase the efficiency in management of working
capital.
To develop the different sources of finance.
To know the financial position of the company.
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CURRENT ASSETS
Current assets are those assets which can convert in to cash within a short period normally
one accounting year.
Constituents of current assets
1) Cash in hand and cash at bank
2) Bills receivables
3) Sundry debtors
4) Short term loans and advances
5) Inventories of stock as
a. Raw material
b. Work in process
c. Stores and spares
d. Finished goods
6) Temporary investment of surplus funds
7) Prepaid expenses
8) Accrued incomes
9) Marketable securities
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CURRENT LIABILITIES
Constituents of current liabilities
1) Accrued or outstanding expenses.
2) Short term loans advances and deposits.
3) Dividends payables.
4) Bank overdraft.
5) Provision for taxation, if does not amount to of profit.
6) Bills payable.
7) Sundry creditors.
The gross working capital concept is financial or going concern concept whereas net
working capital is an accounting concept of working capital. Both the concepts have their
own merits.
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GENERAL INFORMATION OF ALEMBIC
LIMITED
LOGO
The BLUE color represents stability, knowledge, dependability and strength of character.
The GREEN color symbolizes prosperity and freshness of thoughts (innovation).
The two uni-directional arrows in the logo indicate momentum to achieve the real
potential to reach higher goals and aspirations. It gives a feeling of directed and purposeful
movement in the company.
Alembic made a humble beginning more than 10 decades ago in 1907, it has been driving
itself on ethos of „Self Reliance, Indigenization, Innovation and Import Substitution. This
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very commitment and focus resulted in Alembic becoming the Public Sector Company.
Alembic is in the business of improving the quality of life and healthcare in over 75 countries
around the world.
The credit for setting up this pharma company is shared by three people – promoter RajMitra, B.D. Amin, Dr. T.K. Gajjar and Prof. Kotibhaskar under the guidance of H.H
Maharaja Sayajirao III.
Alem bic‟ is Asia's most respected integrated pharmaceutical company with
manufacturing practices and facilities in Baroda, Panelav, Karakhadi and Baddi that conform
to WHO-GMP guidelines with a total turnover in excess of Rs. 1200 crores. Alembic
Research Center (ARC) spread over 120,000 sq ft at Vadodara has state-of-the-art research
facilities, designed conforming to international standards.
From 1950‟s onwards, it ventured into pharmaceutical business and after 1960 in the
production of bulk drugs. Alembic Ltd. is the 17th largest pharmaceutical company in India
and is engaged is manufacturing of basic drugs, pharmaceuticals and antibiotic formulations.
The major basic / bulk drugs manufactured are Penicillin, Erythromycin and Roxithromycin.
Basic production of antibiotic like erythromycin and penicillin is a major activity of the
company. The company can be considered as a pioneer in manufacturing Penicillin through
fermentation process by developing indigenous know-how and, over the years, has improved
on the process technology, the culture and the yields with the help of its own R & D efforts.
The company was conferred Sir P.C. Ray award for indigenous manufacturing of
Penicillin. Alembic Ltd. is also the first and the only basic manufacturer of Erythromycin in
the country. Alembic has also got the distinction of being the first company in India and
second in the world to manufacture the basic drug ROXITHROMYCIN (anti-infective)
under the brand name ROXID. The company has also introduced a revolutionary antibiotic
viz. Azithromycin has unique features of targeted drugs delivery at diseases affected areas in
short courses of treatment popularly termed „tissue directed antibiotic therapy‟. Both Roxid
and Azithral were fruits of latest scientific developments in Pharmaceuticals and in
consonance with the past performance in the marcolide group have emerged as brand leaders
despite stiff competition. The company has recently increased the production capacity of
bulk drugs manufacturing process. It has vast infrastructure facilities in terms of land inprime locality and is equipped to take up any further expansion programs.
The company has also developed various other companies engaged in the area as diverse
as manufacture of glass ware, pesticides and weedicides , fabrications of heavy machinery
for various industrial, printing activities, manufacture of aluminum vial seals and plastic
caps, finance and leasing, investment activities, etc.
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Alembic Group is one of the oldest and most respected business houses with strong and
diverse presence in healthcare, engineering, pharmaceutical and glass sectors. Alembic has
speeded its wings in other than pharmaceutical industry; which are proudly known as
Alembic’s Group Companies.
ALEMBIC GROUP COMPANIES
ALEMBIC LIMITED, the pharmaceutical company.
PAUSHAK LTD. – Leader in Phosgene based derivatives.
Paushak has mastered the Production of phosgene gas and phosgene based specialty
Chemicals / intermediates through indigenously developed Technology. These chemicals are
used in diverse fields such as Pesticides, pharmaceuticals, dyes, plastics etc.
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SHRENO LTD. – GLASS DIVISION (known as YERA Glass)
The Pioneering effort of Shreno from which emerged YERA, first name recalled at the
mention of Glassware. The support of a wide dealership network all over the country has
enabled Yera to achieve a major share in the glassware market. Yera Glassware especially
tableware and dinnerware also reach to many places around the globe through exports
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ALEMBIC LIGHT PUBLICATION
Light Publication is professionally managed unit serving the present day printing andpackaging requirement of respective clients
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SHRENO LTD. – ENGINEERING DIVISION
Shreno Ltd is the engineering company of Alembic group. Shreno designs, develops and
manufactures process plants and special purpose machines for Biotechnology,Pharmaceuticals, Chemicals and Glassware. The company has been active since 1962, and
has one of the best equipped manufacturing facilities in the region. Its customers are major
chemical and pharmaceutical companies, glassware manufacturers and nuclear fuel
processing facilities. The company is set for major expansion activity and market its presence
felt in international markets.
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BHAILAL AMIN GENERAL HOSPITAL (BAGH)
The group includes BHAILAL AMIN GENERAL HOSPITAL (BAGH), an ISO 9001:2000
certified 160 bed-premier hospital, providing all health-care amenities under one roof. This
world-class facility is equipped to provide multi-specialty and tertiary healthcare, 24-hours
emergency, intensive care units, a heart command center, besides a plethora of pathological
testing facilities and a blood bank. BAGH has been in the forefront of ushering in a
revolution in health care in India. From a highly qualified team of doctors to followinginternationally acclaimed practices, everything at BAGH is aimed at offering the best in
health care.
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VISION STATEMENT
To become a knowledge driven global pharmaceutical company with the highest levels of
operational excellence in all spheres.
MISSION STATEMENT
To give access to the best health care products at affordable prices to everyone, anywhere in
the world.
ALEMBIC’S BUSINESSES
API BUSINESS
FORMULATIONS BUSINESS
RESEARCH & DEVELOPMENT ( API , F&D and Bio-Equivalence)
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API (ACTIVE PHARMACEUTICAL INGRIDIENT)
API is significant operations for Alembic Limited.
The fermentation based APIs are manufactured at its main manufacturing facility exceeding3 million sq.mt.
Alembic has an exclusive facility for manufacturing synthetic APIs, consisting of
independent manufacturing blocks for Macrolides, NSAIDs and other drugs. API
manufacturing facility at Panelav has successfully under gone inspection of USFDA and
EDQM.
FORMULATIONS BUSINESS
Plant was commissioned in March 2003.
Plant is designed exclusively for Non ß-lactum Oral Solid Dosage forms.
RESEARCH AND DEVELOPMENT
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Alembic's Multidisciplinary R&D Portfolio Includes:
API RESEARCH
FORMULATIONS RESEARCH
ANALYTICAL RESEARCH
INTELLECTUAL PROPERTY
AWARDS & CERTIFICATIONS
R&D facilities approved by DSIR, GOI in 1975
ISO 9002, ISO 14001, ISO 27001 Certification for its Manufacturing Facilities
First Chemexcil Award in 1991-92
Received award for "Excellence in Environment Preservation and Pollution Control" by
the Federation of Gujarat Industries (FGI) in 1997
Dr.P.C.Ray Award for Quality Inspected in 1969 and approved by MCC (South Africa),
MHRA (UK), USFDA (US) and EDQM
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LOCATIONS
REGISTERED OFFICE BARODA
MANUFACTURING FACILITIES API & Research Center, BARODA
API PLANT, PANELAV
API PLANT, KARAKHADI
FORMULATION PLANT, PANELAV (EOU) & BADDI (DOMESTIC)
FORMULATION MARKETING, MUMBAI
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ALEMBIC CAMPUS
Houses 438 Employees & their families.
Alembic , Tejas ,Utkarsh,Ujjaval Vidyalaya .
Bhailal Amin General Hospital.
Two Libraries - with 12,000 books, 25,000 back volumes and 60 periodical titles, Onlyline database like STN ,SCIFINDER & related with Patents. CD Rom Data base Patent &
Synthesis & Pharmacopeia.
Alembic Cricket Academy.
Badminton / Table Tennis Courts.
Fully computerized Bank / Post Office.
Employees‟ Departmental Store & Yera Arcade.
AXIS Bank ATM.
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BOARD OF DIRECTORS
Sr.No.
Name Designation
1. Mr. Chirayu
Ramanbhai Amin
Chairman &
Managing Director
2. Mrs. Malika Chirayu
Amin
Whole-time Director
3. Dr. Babubhai
Rambhai Patel
Director
4. Mr. Raj Kumar
Baheti
President - Finance
&
Company Secretary
5. Mr. Pranav Natverlal
Parikh
Director
6. Mr. K. G.
Ramanathan
Director
7. Mr. Paresh M.
Saraiya
Director
8. Mr. Pranav Amin Director & Chief
Business
Development Officer
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ALEMBIC -- MILESTONE
1907 :- A joint stock company with a limited liability registered first in
Bombay and then in Baroda. The company was named
ALEMBIC CHEMICAL WORKS CO. LTD.
1909 :- French Distillery Plant Worth Rs. 1 lakh along with machinery for
Pharmaceutical purposes installed in Baroda.
1933 :- Company celebrated Silver Jubilee.
1934 :- Branch Office in Madras was established.
1935 :- Establish a sales office in Calcutta.
1940 :- Started manufacturing cough syrup, vitamins, tonics and sulphur
Drugs.
1952 :- Started R & D activity.
1960 :- Installed Asia’s Largest Fermentor with capacity of 130 KL
1961 :- Inauguration of penicillin Plant by Late Shri Lal Bahadur
Shastry.
1967 :- Bulk Manufacturing of Vitamins B12 by fermentation with know
How of pierell company of Italy.
1968 :- Established Paushak Ltd.
1969 :- Received prestigious Dr. P.C.Ray award for Quality for consecutive
Three years ( 1969 – 1971 )
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1975 :- Pharma Building was set up.
1979 :- Started Rural Development Centre, at Panelav.
1991 :- Received First Chemexcil Award.
1992 :- Launched Azithral – A brand of Azithromycin.
1997 :- Launched Roxid Liquid – First of its kind in the world.
1998 :- Launched Azithral Liquid – First of its kind in the world.
1999 :- Changed Company’s name as – “ ALEMBIC LIMITED”
2000 :- Achieved ISO 14001 certificate.
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FINANCE DEPARTMENT
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ORGANIZATION CHART OF FINANCE DEPARTMENT
PRESIDENT
↓
GENERAL MANAGER
↓
SR. MANAGER
↓
MANAGER
↓
DEPUTY MANAGER
↓
ASSISTANT MANAGER
↓
SR. EXECUTIVES
↓
EXECUTIVES
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BASIC FINANCIAL FUNCTIONS FOLLOWED AT ALEMBIC
1. Accounts
2. Indirect taxation
Taxes which are indirectly levied from the end user that is individual or a company by the
government.
Excise
Service Tax
Export Benefits / EXIM policy
Sales tax / Value Added Tax (VAT)
Business Finance
3. Business finance
4. DIRECT TAXES
5. INSURANCE
6. SECRETARIAL AND LEGAL PRACTICES
Business
Finance
Domestic International
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FINANCIAL OBJECTIVE
1) To ensure adequate return on the capital employed and maintain a reasonable annual
dividend on equity capital.
2) To ensure maximum economy in expenditure.
3) To develop long-term corporate plans to provide for adequate growth of the
Corporation’s business.
4) To manage and operate all facilities in an efficient manner so as to generate adequate
internal resources to meet revenue cost and requirements for project investment, without
budgetary support.
5) To complete all planned projects within the scheduled time and approved cost.
6) To reduce the cost of production of products by means of systematic cost control
measures and thereby sustain market leadership through cost competitiveness.
7) To continue to make an effort in bringing reduction in the cost of production of products
by means of systematic cost control measures.
8) To generate sufficient internal resources for financing partly/wholly expenditure on new
capital projects.
9) To ensure adequate return on capital employed and maintain a reasonable annual
dividend on its equity capital
10) To ensure maximum economy in expenditure.
11) The endeavor to complete all plan projects within stipulated time and within stipulated
cost estimated.
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RESEARCHMETHODOLOGY
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RESEARCH METHODOLOGY
METHODOLOGY:-
The unit selection for the study was ALEMBIC LTD.. The study was undertaken at
ALEMBIC LTD., Baroda.
The Primary data was collected by way of interviewing the staff at Baroda unit. Secondary
source like Books, Circulars, Alembic Ltd. Publication and Internet were used.
SOURCES OF INFORMATION:-
In order to collect the reliable information, the necessary data has been collected with the
help of different sources that are-
1) Primary sources
2) Secondary sources
1) A Primary source of information is the source of information thought which information
obtained is first hand i.e., from interviewing the officials at ALEMBIC LTD. BARODA.
2) Secondary source of information provides the information which is used by some other
researcher but still it is useful as a reference for the study in some other research work. Under
this source, text books, past project reports, published journals, websites, etc. were used.
OBJECTIVE:
Understand the working capital position and liquid position for the ALEMBIC LTD
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DATA ANALYSIS
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DATA ANALYSIS:
In this study the techniques of ratio analysis have been used. The collected data have been
analyzed in following way.
1. Analysis of liquidity ratio.
2. Analysis of liquidity position.
3. Analysis of component of gross working capital.
4. Analysis of component of Net working capital.
SCOPE OF THE STUDY:
1) The study of working capital is limited to company and their year balance sheet
performance.
2) The data used in this study have been taken from published annual report only.
3) For making a clear cut opinion, ratio techniques of financial management has been used.
4) The study of liquidity position of the ALEMBIC LTD. data has been used only for three
years.
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STATEMENT SHOWING NET WORKING CAPITAL FROM
YEAR 2008 TO 2010
(Rs. in Lacs)
Particular Year
2008
(Rs)
Year
2009
(Rs)
Year
2010
(Rs)
Current assets,
Loan & Advances:
Sundry Debtors 23,053.94 21,300.35 19,286.72
Inventory 20,281.20 23,838.89 24,494.93
Loans & Advances. 8,637.80 12,716.73 12,956.86
Cash & Bank
Balances
1,865.64 1,640.58 2,385.11
Total (Gross
Working Capital)
53,838.58 59,496.55 59,123.62
Less
Current liabilities
& Provisions
Current Liabilities. 15,218.57 18,815.94 21,821.53
Provisions. 2,882.88 1,423.53 1897.80
Total. 18,101.45 20,239.47 23,719.33
Net Working
Capital.
35,737.13 39,257.08 35,404.29
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INTERPRETATION:-
From the graphically representation, We can say that from year 2008 to 2009 current assets
of the company increases. But in March 2010 it was decrease up to 59,123.62 Rs. Because of
decrease in sundry debtors of the company.
SUNDRY DEBTORS:-
Sundry Debtors is an entity from who amounts are due for goods sold or services rendered or
in respect of contractual obligations. Also termed: debtor, trade debtor, and account
receivable.
Graphical Presentation of sundry debtors(Rs. in Lacs)
Year March 2008 March 2009 March 2010
Debtors 23,053.94 21,300.35 19,286.72
23,053.94
21,300.35
19,286.72
17,000.00
18,000.00
19,000.00
20,000.00
21,000.00
22,000.00
23,000.00
24,000.00
Mar-08 Mar-09 Mar-10
Debtors
Debtors
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INTERPRETATION:-
From the graphically representation, we can say that from year 2008 to 2010 Sundry Debtors
of the Alembic Ltd. is continue decrease.
INVENTORY:-
The raw materials, work-in-process goods and completely finished goods that are considered
to be the portion of a business's assets that are ready or will be ready for sale. Inventory
represents one of the most important assets that most businesses possess, because the
turnover of inventory represents one of the primary sources of revenue generation andsubsequent earnings for the company's shareholders/owners.
Graphical Presentation of Inventory
(Rs. in Lacs)
Year March 2008 March 2009 March 2010
Inventory 20,281.20 23,838.89 24,494.93
20,281.20
23,838.89 24,494.93
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
30,000.00
Mar-08 Mar-09 Mar-10
Inventory
Inventory
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INTERPRETATION:-
From the graphically representation, we can say that inventory level is continues increases. In
March 2008 it was 20,281.20 which increase up to 23,838.89 and in March 2011 it is24,494.93. Because of increase in closing stock it indicates that there is decrease in sales of
the compan
LOANS & ADVANCES:-
Graphical Presentation of Loans & Advances
Year March 2008 March 2009 March 2010
Loans &
Advances
8,637.80 12,716.73 12,956.86
8,637.80
12,716.73 12,956.86
0.00
2,000.00
4,000.00
6,000.00
8,000.00
10,000.00
12,000.00
14,000.00
Mar-08 Mar-09 Mar-10
Loans & Advances
Loans & Advances
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INTERPRETATION:-
From the graphically representation, we can say that loans & advances of Alembic Ltd. is
continues increases in March 2009 it was 12,716.73 Rs. And in March 2010 it was12,956.86.
CASH & BANK BALANCE:-
Graphical Presentation of Cash & Bank Balances
(Rs. in Lacs)
Year March 2008 March 2009 March 2010
Cash & Bank
Balances
1,865.64 1,640.58 2,385.11
INTERPRETATION:-
From the graphically representation, we can say that cash & bank balance of Alembic Ltd. is
increase from March 2008 to March 2010. It is Good for Alembic Ltd. Because of increase in
cash & bank balance company should eligible for satisfying its debt obligations.
1,865.641,640.58
2,385.11
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
Mar-08 Mar-09 Mar-10
Cash & Bank Balances
Cash & Bank Balances
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CURRENT LIABILITIES:-A company's debts or obligations that are due within one year. Current liabilities appear
on the company's balance sheet and include short term debt, accounts payable, accrued
liabilities and other debts.
Graphical Presentation of current Liabilities
(Rs. in Lacs)
Year March 2008 March 2009 March 2010
Current
Liabilities.
15,218.57 18,815.94 21,821.53
15,218.57
18,815.94
21,821.53
0.00
5,000.00
10,000.00
15,000.00
20,000.00
25,000.00
Mar-08 Mar-09 Mar-10
Current Liabilities.
Current Liabilities.
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INTERPRETATION:-
From the graphically representation, we can say that Current Liabilities of Alembic Ltd. is
continuously increase from March 2008 to March 2010. This is not good for company.
PROVISIONS:-
A provision takes into account an expected expense, showing it as a liability on the balance
sheet.
Graphical Presentation of Provisions
(Rs. in Lacs)
Year March 2008 March 2009 March 2010
Provisions. 2,882.88 1,423.53 1,897.80
2,882.88
1,423.53
1,897.80
0.00
500.00
1,000.00
1,500.00
2,000.00
2,500.00
3,000.00
3,500.00
Mar-08 Mar-09 Mar-10
Provisions.
Provisions.
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INTERPRETATION:-
From the graphically representation, Expenses on thae provision is decrease in March 2009
as compared to March 2008. And it was increase in March 2010 as compared to March 2009.
NET WORKING CAPITAL:-
Net working capital refers to the different between Current assets and current liabilities are
those claims which are expected to nature of payment within an account.
Graphical Presentation of Net Working Capital
(Rs. in Lacs)
Year March 2008 March 2009 March 2010
Net Working
Capital.
35,737.13 39,257.08 35,404.29
35,737.13
39,257.08
35,404.29
33,000.00
34,000.00
35,000.00
36,000.00
37,000.00
38,000.00
39,000.00
40,000.00
Mar-08 Mar-09 Mar-10
Net Working Capital.
Net Working Capital.
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INTERPRETATION:-
From the graphically representation, Net Working Capital is increase in Mrach 2009 as
compared to March 2008 & it was decrease in March 2010 as compared to March 2008 &2009. It was decrease in 2010 because of increase in Inventory level, loans & advances and
also increase in cash & bank balance of the company.
RATIO ANALYSIS:-
a). Current Ratio
Current ratio is calculated by dividing current assets by current liabilities. The current ratio
of 2:1 is considered satisfactory.
Objective: The objective of computing this Ratio is to measure the ability of the firm to meet
its short-term obligations and reflect financial strength of the firm.
Current ratio = Current assets / Current liabilities
Current Ratios of ALEMBIC LTD.(Rs. in Lacs)
YEAR 2008 2009 2010
CURRENT ASSETS 45,200.78 46,779.82 46,166.76
CURRENT LIABILITIES 15,218.57 18,815.94 21,821.53
CURRENT RATIO 2.97 : 1 2.48 : 1 2.11 : 1
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INTERPRETATION:-
Standard current ratio 2: 1 and our organization current ratio is 2.11 : 1. It is Lower in
comparison of 2008 & 2009. It is not good for organization to meet their current obligations.
b).Quick Ratio
Objective: The objective of computing this ratio is to measure the ability of the firm to meetits short-term obligation as and when due without relying upon the realization of stock.
Generally, a quick ratio of 1:1 is considered to represent satisfactory current financial
position.
Quick ratio= Current assets – Inventories / Current liabilities
2.97
2.48
2.11
0
0.5
1
1.5
2
2.5
3
3.5
2008 2009 2010
CURRENT RATIO
CURRENT RATIO
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Quick Ratios of ALEMBIC LTD.(Rs. in Lacs)
YEAR 2008 2009 2010
LIQUID ASSET 43,335.14 45,139.24 43,781.65
CURRENT LAIBILITIES 15,218.57 18,815.94 21,821.53
QUICK RATIO 2.84 2.40 2.00
INTERPRETATION:-
The liquid assets are equal to or more than liquid liabilities the condition may be consider as
satisfactory. The quick ratio of 1 : 1 is considered to be a satisfactory ratio.Our origination
quick ratio more than 1 : 1. So it is good for our origination because it may be meeting its
short term obligation in time.
2.84
2.4
2
0
0.5
1
1.5
2
2.5
3
2008 2009 2010
QUICK RATIO
QUICK RATIO
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Current Assets to Working Capital Ratio
This ratio shows the relationship between current assets and working capital. It indicates the
percentage of current assets to working capital.
Current Assets to Working Capital Ratio = Current Assets
Working Capital
(Rs. in Lacs)
YEAR CURRENT
ASSETS
WORKING
CAPITAL
CA to WC
RATIO
March 2008 45,200.78 35,737.13 1.26
March 2009 46,779.82 39,257.08 1.19
March 2010 46,166.76 35,404.29 1.30
1.26
1.19
1.3
1.12
1.14
1.16
1.18
1.2
1.22
1.24
1.26
1.28
1.3
1.32
2008 2009 2010
CA to WC RATIO
CA to WC RATIO
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INTERPRETATION:-
CA to WC Ration is decrease in March 2009 as compared to March 2008 & March 2010
because there is increase in Net Working Capital of company as compared to March 2008 &March 2010.
Working Capital Turnover Ratio
This Ratio establishes a relationship between net sales and working capital.
Working capital = Current Assets – Current Liabilities
Working capital Turnover Ratio = Cost of goods sold / Net working capital
COGS = Sales – Gross Profit
Working capital turnover ratio is to indicate the velocity of the utilization of net working
capital. This ratio indicates the number of times the working capital is turned over in the
course of a year.
(Rs. in Lacs)
YEAR COGS WORKING
CAPITAL
WORKING
CAPITAL
TURNOVER
RATIO
March
2008
86,617.55 35,737.13 2.42
March
2009
99,444.45 39,257.08 2.53
March
2010
92,408 35,404.29 2.78
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INTERPRETATION:-
Working Capital turnover ratio is increases in March 2010 as compard to March 2008 &
2009. It is 2.42 in March 2008 & increase by 2.78 in March 2010.
2.42
2.53
2.78
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2008 2009 2010
WORKING CAPITAL TURNOVER RATIO
WORKING CAPITAL
TURNOVER RATIO
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Findings & Observations
The company finance its working capital through its internal accruals. It is also making
use of financial instruments like Overdraft, Cash credit, Bill Purchase, Export packing
credit foreign bill Purchase/Discount. It makes use of such instrument in order to be safe due to
export dealing of vary high values
There are increase in current liabilities of the Alembic ltd. Therefore company should take
proper steps to maintain current liabilities.
In ratio analysis, I observed of comparison with inter firm comparison and standard.
The successful implementation of working capital budget involves the preparing of
separate budget for each element of working capital, such as, cash, inventories and
receivables etc.
The requirement of working capital is not stable in the company. It was 35,737.13 Rs. In
2008, 39,257.08 Rs. In 2009 and 35,404.29 Rs. In 2010.
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LIMITATIONS OF STUDY
Period of time: Internship Project time is short and within this time everything of the
study is not covered deeply.
Due to time constraints all the aspects of the WORKING CAPITAL couldn ’t be studied
and elaborated.
Ratios of company have meaning only when they are compared with some standard. It is
difficult to find out proper basis of comparison.
In limited time it is not possible to interact with all the employees of the organization
who are directly involve in the financial accounting department.
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SUGGESTIONS
The plant must take certain steps to decrease the working capitalcycle. One way can be better management of inventories.
Company should use Management Information System (MIS) as it provides very
effective information, which ultimately helps in decision-making. This results in the
proper future projections effectively.
Company should install modernized equipments and machines in the production
plants and new techniques should also be used to produce.
The company needs to improve a lot in advertisements. Advertisements are the best way
to enhance the sales and ultimately the revenues. But the company is not able to advertise
its products properly, due to which the customer is unaware of any brand that comes from
it. It is a common saying that “out of sight is out of mind”. Therefore the company must
make attempts to use proper advertising media so as to set their brands in the minds of
the consumers. It should be more consumers oriented rather than being customer oriented
Proper market survey should be conducted to know consumers/dealers buyingbehavior
Company should take several steps to make stable requirement of working capital.
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CONCLUSION
The study involves practical and conceptual over view of decisions concerning currentassets like cash and bank balance ,inventories( like raw materials ,w-i-p, finished goods
),sundry debtors, loans and advances, other current assets and current liabilities like
sundry creditors, securities and other deposits, other current liabilities and provisions of
Alembic Ltd.. Was with the objective of maximizing the overall net profit of the bank.
And complete synchronization and co ordination among the working capital components
which shall contribute to optimum level of operations. Mismanagement of each or any of
these components shall be detrimental to the objectives of efficient operation,
profitability and maximization of overall value of the bank.
The working capital limits would be considered only after the project nearing completion
and after ensuring control over the inventory. The inventory is a great concern for
Alembic Ltd. and it need proper procurement and management.
Eligible working capital limits would be assessed by cash Budget method And Projected
production method depending the market condition, scale of operation, nature of
activity/enterprise and duration/length of operating cycle etc.
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BIBLIOGRAPHY
Books
Financial Management
By I. M. Pandey (Sixth Edition)
Annual Report of ALEMBIC LTD.
Websites
www.alembic-india.com
www.google.com