Working capital management,and financial analysis of tnpl. by chitta manoj vekata saikumar, 13022,

1. WORKING CAPITAL MANAGEMENT,
& FINANCIAL ANALYSIS
of
TNPL
by
Chitta Manoj venkata Saikumar 13022

2. Working
Capital
Financial
Analysis

3. PRESENTATION FLOW
Industry Profile
Objective &
Methodology &
Limitations
Working capital
days Graphs
Working capital
days
Company
Profile
Comparative
Working capital
Learnings
Recommendati
ons
Findings
Financial
Analysis
Calculations
done & Tools
used
Working capital
Discussion

4. INDUSTRY PROFILE:
 Indian Paper Industry accounts for about 1.6% of the world's
production of paper and paperboard.
 The estimated turnover is Rs 25,000 crore (USD 5.95 billion).
 Newsprint consumption -2 million tones, 1.2 million tones is
manufactured and 0.8 million tones is imported.
 The Rs. 22000-crore paper industry in India, rated 15th
largest in world engages about 1.5 million people with the
help of Rs. 2500 crore Government subsidy.
 Raw materials used forest based, agro based and recovered
paper.

5. SHARE OF DIFFERENT TYPES OF RAW-MATERIALS USE IN INDIA’S P&P
INDUSTRY
Forest-based
Agro-based
Recovered paper

6. COMPANY PROFILE:
 Established by the government of Tamil Nadu in 1979.
 Headquarter: Chennai, Tamil Nadu
 Mill: Kagithapuram, Karur District, Tamil Nadu
 Branch locations: Ernakulam, Hyderabad, Bangalore, Mumbai,
New Delhi, Kolkata and Ahmedabad
 Number of employees:–1,976
 Installed capacity: Paper: 400,000 MT
 Production: 2012-13 : 371,637 MT
2011-12: 343,306 MT
 Financials Turnover: 2012-13: Rs. 1,881.18 crores
2011-12: Rs. 1,538.99 crores
Growth Rate: 22.23%
 Net profit: 2012-13: Rs. 91.48 crores (after tax)
2011-12: Rs. 108.94 crores (after tax)
Growth Rate: (16)%
 Net worth: 2012-13: Rs. 1,035 crores
2011-12: Rs. 971 crores

7. Objectives: Methodology:
OBJECTIVES & METHODOLOGY:
 To examine the liquidity position of
the firm
 To study the working structure
policies
 To understand the Nature of Paper
industry
 To offer suggestions to the company,
for betterment.
 To understand problems faced in
working capital management.
 To examine Financial Position of
company
 To study the financial performance of
Paper industry.
 To study and understand the different
components of Paper Industry.
 Primary Data
 Secondary Data
Limitations:
Errors in the Secondary data
Uncertainty
Confined to Published Data
Year ending time.
Complete access of data.

8. CALCULATIONS AND FINDINGS
WORKING CAPITAL
1. Working capital days
2. Comparative working
capital
FINANCIAL ANALYSIS
1. Liquidity
2. Leverage
3. Turnover
4. Profitability

9. CONCEPT OF WORKING CAPITAL:
Types of Working capital
1. Gross working capital :
1. It is the firms investment in total current assets / circulating assets.
2. Net working capital:
This can be defined as two ways.
1. The excess amount of current assets over current liabilities.
2. The amount of firms current assets which is financed by the long-term funds

10. Basic types in Working Capital
1. Permanent Working Capital
1. %Current Assets
2. Continuous
2. Temporary Or Variable Working Capital
1. Activity Based
2. Different Times
Ways of maintaining Working capital
 Estimating the working capital amount.
 Sources due to which these funds have to be raised.

11. COMPARISON OF WORKING CAPITAL
YEAR CURRENT ASSET
CURRENT
LIABILITIES
WORKING
CAPITAL
NET WORKING
CAPITAL
2009 49264.99 47937.76 1327.23
2010 58198.46 68647.91 (10449.45) 11776.68
2011 64477 100771.8 (36294.8) 25845.35
2012 93887.61 136628.12 (42740.51) 6445.71
2013 82740.68 141382.71 (58642.03) 15901.52
-100000
-50000
0
50000
100000
150000
200000
250000
2009 2010 2011 2012 2013
WORKING CAPITAL
CURRENT LIABILITIES
CURRENT ASSET

12. Cash Conversion cycle
Key Terms
Accounts
Work-in-
progress
Raw
materials
Finished
goods
Cash
Each of the operating cycle components can be
calculated as follows
W= Average work-in-progress inventory
Average cost of production per day
R= Average stock of raw materials and stores
Average raw materials & stores consumptions per day
D= Average book debts
Average credit sales per day
C= Average trade creditors
Average credit purchases per day
O=R+W+F+D-C
Where,
O= Time period of operating cycle
R= Raw material & store storage period
W= Work-in-progress period
F= Finished goods storage period
D= Debtor collection period
C= Creditor payment period

13.  Current Ratio
The current ratio is a general
indicator of the business's ability to meet its
short-term financial Commitments
 Acid Test
The acid test or quick ratio is the
current ratio modified to provide a more
prudent measure of shortterm liquidity
Acid test ratio =
Particulars 2013 2012 2011 2010 2009
curent ratio 0.585225 0.687176 0.639832 0.865262 1.052719
Particulars 2013 2012 2011 2010 2009
quick ratio 0.398197 0.440652 0.4364 0.618914 0.653543

14. 0
0.2
0.4
0.6
0.8
1
1.2
2013 2012 2011 2010 2009
CURRENT & QUICK RATIO
curent ratio quick ratio
 Less short term solvency
 Difficulty in paying current
liabilities

15. Turnover ratio
 Inventory turnover ratio
A ratio showing how
many times a company's
inventory is sold and replaced
over a period
 Debtor turnover ratio
An accounting
measure used to quantify a
firm's effectiveness in extending
credit as well as collecting debts
 Creditor turnover ratio
A short-term
liquidity measure used to
quantify the rate at which a
company pays off its
suppliers.
Particulars 2013 2012 2011 2010 2009
inventory
turnoverra
tio 2.638198 2.024986 2.322091 2.002431 2.150039
Particulars 2013 2012 2011 2010 2009
Debtor /
Collection
turnover
ratio 6.045305 5.528138 6.12107 5.719358 8.345599
Particulars 2013 2012 2011 2010 2009
Creditor
turnover 5.354845 6.107935 7.335093 8.159004 6.851723

16.  Since it is manufacturing is Continued
process they can not stop the process
so they have to maintain the Huge
inventories.
 They are mostly allowing the long
term contracts so the costumers are
same so there is no big changes in
Accounts receivable
 Because of sudden increase in
interest (new plat constructing) paid
during the last two years the Creditor
turnover ratio lagged down0
1
2
3
4
5
6
7
8
9
2013 2012 2011 2010 2009
TURNOVER RATIOS
inventory turnoverratio Debtor / Clection turnover ratio Creditor turnover

17. 0
50
100
150
200
250
300
350
400
450
500
2013 2012 2011 2010 2009
138.3520277
180.2481917
157.1859058
182.2784658 169.7643347
60.37743171
66.02584749
59.630095
63.81834658
43.73562668
68.16256558
59.75832928
49.76078828
44.73585095
53.27127581
130.5668939
186.5157099
167.0552125
201.3609614
160.2286856
Turnover Ratios in Days
Inventory turnover ratio in days Recivable turnover ratio in days
Payable turnover ratio in days Cash Convertion Cycle :
 Inventory turnover ratio in days are 165.66
 Receivable turnover ratio in days are 58.7
 Payable turnover ratio in days 55.1
 Cash Conversion Cycle 169.14
Here it is taking more days to generate cash
from sales and operations so they may need
maintain much more working capital for
regular basis
Particulars 2013 2012 2011 2010 2009
Inventory turnover ratio in days 138.352 180.2482 157.1859 182.2785 169.7643
Recivable turnover ratio in days 60.37743 66.02585 59.63009 63.81835 43.73563
Payable turnover ratio in days 68.16257 59.75833 49.76079 44.73585 53.27128
Cash Convertion Cycle : 130.5669 186.5157 167.0552 201.361 160.2287

18.  Debt-Asset Ratio
Defines the total
amount of debt
relative to assets
Leverage Ratio
 Debt-Equity Ratio:
It indicates what
proportion of equity
and debt the
company is using to
finance its assets
 Interest-Coverage
Ratio:
Determine how easily
a company can pay
interest on outstanding
debt
 Fixed Charges
Coverage Ratio:
indicates a firm's ability to
satisfy fixed financing
expenses, such as interest
and leases.
Debt-Equity Ratio 1.113635 1.477555 1.35844 1.694099 1.213958
Debt-Asset Ratio 0.331266 0.403455 0.404522 0.502622 0.40428
Interest-Coverage Ratio 2.042448 1.885659 5.411343 4.422489 4.203788
Fixed Charges Coverage Ratio 0.508917 0.462313 0.580686 0.508631 0.830308
Ratiosyears 2013 2012 2011 2010 2009

19. 0
1
2
3
4
5
6
2012-13 2011-12 2010-11 2009-10 2008-09
Ratios
Years
Leverage Ratio
Debt-Equity Ratio Debt-Asset Ratio
Interest-Coverage Ratio Fixed Charges Coverage Ratio
 Owners contribution is merely just 30%
more than Creditors
 Borrowed funds merely contributing on
40% fixed assets
 Relatively more before 2012, on an
average it is 4 times the interest
 Fixed charge coverage ratio is heatlthy
which is <1

20. Profitability Ratio
 Gross Profit margin ratio
 measures trading gross
profit relative to sales
revenue
 Operating profit margin ratio
 measures trading Operating
profit relative to sales revenue
 Net Profit Margin Ratio
 measures trading net profit
relative to sales revenue
Gross Profit Margin ratio 0.561718 0.628884 0.637223 0.674849 0.657642
Operating profit margin ratio 0.127553 0.10572 0.168624 0.185655 0.168443
Net Profit Margin Ratio 0.047226 0.069174 0.12008 0.119368 0.095918
Ratiosyears 2013 2012 2011 2010 2009

21. 0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
2012-13 2011-12 2010-11 2009-10 2008-09
Ratios
Years
Gross Profit Margin ratio Operating profit margin ratio Net Profit Margin Ratio
 Huge gap between gross profit/operating
margin ratio telling the presence of bulk
selling and administration expences
 2013 decrease in the gross profit high
increase in manufacturing cost
 In 2013, 2012 financial cost is making
operating profit is less than average
 Because of increase in all expenses net
profit became less for last two years
even turnover is increasing
Profitability Ratio

22. FINDINGS:
There is no such classification like Permanent and Temporary
Working capital.
Cost reduction will make considerable increase in profit
They not are following matching approach.
There is a need of working capital by market driven .
Their major source of debtors are banks.
Employees expenses even more then the net profit.
Concern about echo system so they implementing Reuse of waste
even cost is more.
Strength and weakness of Indian Paper Industry.
Market share and production of different paper companies in India.
Challenges faced by Indian Paper companies.

23. SUGESSTIONS:
Maintaining has to be there in between Profit and risk.
They can utilize economic scale for reduction of paper
production
With Monopoly & good will in suppliers they can postpone
payments little more
It is preferable to forecast sales , control inventory as much as
possible.
prepare cash budgets.
Utilize the diversification of industry
Liquidity may can increase by issuing long term borrowing like
debentures
Following the International Standards in production and waste
management.
Improving the skills set of employees

24. LEARNING:
Manufacturing Industrial exposure
Public sector unit Work culture
Familiar to components in annual reports of Manufacturing
industry
Major differences between old and new versions of annual
reports