Project on working capital

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Project on working capital

  1. 1. D.A.V SCHOOL OF BUSINESS MANAGEMENT A Summer Internship Project Report on WORKING CAPITAL MANAGEMENT OF IDCO,BHUBANESWAR. External Guide Internal Guide Mr. Satyajit Dixit. Mr.D. Sarangi Faculty member Deputy Manager DSBM,Unit-8,Nayapalli, IDCO,Bhubaneswar Bhubaneswar. Submitted by: SONU PRAMANICK Roll No.: 56316UT090 5th Semester Session: 2009-12
  2. 2. CONTENTS Chapter Page No. TITLE Internal certificate ii External certificate iii Declaration iv Acknowledgement v Content table vi List of tables and figures vii CHAPTER 1 1 Introduction CHAPTER 2 2-12 Company profile CHAPTER 3 13-29 Literature review CHAPTER 4 Research methodology 30 CHAPTER 5 31-39 Finance Analysis CHAPTER 6 40 Limitations of the study CHAPTER 7 41 Suggestions and recommendations CHAPTER 8 42 Conclusion CHAPTER 9 43 Bibliography
  3. 3. DECLARATION I do hereby declare that this piece of project report titled working capital management has been studied by me at Orissa Industrial Infrastructure Development Corporation (IDCO), Bhubaneswar and submitted on fulfillment of the requirement for the Degree of Bachelor of Business Administration at DAV School of Business Management, Unit-8, Nayapalli, Bhubaneswar and has not been submitted to any other institution and has never been published before. Date: Place: Sonu Pramanick 5th Semester DAV School of Business Management Unit-8, Nayapalli, Bhubaneswar.
  4. 4. ACKNOWLEDGEMENT The satisfaction and euphoria that accompanies the successful completion of any task would be incomplete without mentioning the name of people whose constant guidance, support and encouragement crown all effort with success. At first I am highly grateful to my guide Satyajit Dixit, faculty member, DAV School of Business Management, for being generous in giving me his kind, cordial, wise and illuminating suggestions in completing my project report. And I also thank my teachers Mr. Sudhanshu Sekhar Sahoo and Ms. Anjali Panda for being generous in giving me their kind, cordial, wise and illuminating suggestions in completing my project report. I extend my heartfelt thanks to Mr. D Sarangi(deputy Manager, IDCO, BBSR) for his kind cooperation and constant support throughout the duration of project work. At last I would thank my friends and family who have helped me in successfully completion of this project. Place: Sonu Pramanick Date: Roll No.:56316UT090
  5. 5. D.A.V. SCHOOL OF BUSINESS MANAGEMENT UNIT-8, NAYAPALLI, BHUBANESWAR – 751012, ORISSA Phone: 0674- 2560539, Fax: 2395276 Website: dsbmbbsr@gmail.com Ref. No……………….. Date:………………. INTERNAL CERTIFICATE This is to certify that Sonu Pramanick bearing Enrollment No. 0710132, a student of DAV School of Business Management,Unit-8,Nayapalli, Bhubaneswar has completed her project on working capital Management,IDCO,BBSR as a part of the course curriculum of Bachelor of Business Administration in Utkal University under my supervision and guidance for admission batch 2009-2012. Date: Place: Satyajit Dixit Faculty Member DAV School of Business Management Unit-8, Nayapalli, Bhubaneswar
  6. 6. CHAPTER 2 COMPANY PROFILE Orissa Industrial Infrastructure Development Corporation (IDCO) has been established in the year 1981 with the specific objective of creating infrastructure facilities in the identified Industrial Estate/Areas for rapid and orderly establishment and growth of industries, trade and commerce. Consistent with this objective, IDCO has established/managed 86 Industrial Estates/Areas all over the State. Besides, acquisition and allotment of land to the industries in medium and large sector, assisting them in infrastructure development has been another prime function of this corporation. In addition to the above works, it takes up various construction activities entrusted by State and Central Government Departments and their corporations on agency or contract basis. It provides escort services to investors/developers for implementation of mega projects in the State in the infrastructure sector. This ISO 9001 & ISO 14001 certified Corporation has achieved the unique distinction of being the only State level organization to be conferred the ‘Golden Peacock’ award by the Institution of Directors, New Delhi for adopting and maintaining quality management standards in all its operations.
  7. 7. ACTIVITIES The Corporation is engaged in industrial infrastructure development work for rapid industrialization in the State. The achievements of IDCO in different areas noted below: Industrial Estates and Industrial Areas IDCO has already developed 86 Industrial Estates/Areas in different strategic locations. The cumulative position of construction/development and allotment of sheds/land in different Industrial Estates up to the year 2008-09 is as under: No. of IEs/IAs : 86 Nos. Gross area of IEs/IAs : 8245.872 Acres Built up sheds : 1540 Nos. Sheds allotted, occupied and utilized otherwise : 1439 Nos. Sheds available for allotment : 101 Nos. Land allotted : 4129.928 Acres Net saleable developed land available for allotment : 1810.327 Acres Over 3422 Industries, mostly in SSI sector have been allotted with plots/sheds in these Estates. During this year 222 units have been allotted with land & shed in IEs. The cost realized towards sale of plots is Rs. 1863.96 Lakh and Rs. 133.36 Lakhs received towards sale of sheds/shops. PROJECTS UNDER CENTRALLY SPONSORED PLAN SCHEME
  8. 8. IDCO has also been entrusted with the responsibility of implementing various centrally sponsored infrastructure projects under Industrial Growth Centre, Integrated Infrastructural Development (IID) Centre, Urban Haat, Projects under ASIDE schemes for promotion of small, medium and export oriented industries in the State. The following projects are now under execution: • Growth Centre – Kalinganagar, Jharsuguda & Kesinga. • IID Centre – Khurda, Rayagada & Somnathpur (Balasore) • Urban Haat – Konark & Puri • Food Processing Park, Khurda At Jharsuguda Growth Centre, Phase-III development works at site-I have been planned over Ac. 150 of land with an estimated cost of Rs. 410 lakh. Acquisition of Ac. 135.44 is at advanced stage of completion at Jharsuguda. For road development work at Bolangir Growth Centre site, tender is under finalization. Development works of IID Centres at Khurda and Somnathpur have made substantial progress and scheduled for completion by 31.03.2010. Allotment of land at the two centres is in progress. Development of Food Processing Park, Khurda is in progress and scheduled for completion by March, 2010. Allotment of land is in progress. Urban Haat Puri is in advanced state of completion. INFRASTRUCTURE PROJECTS UNDER PPP MODE:
  9. 9. • Development of Special Economic Zones: Establishment of 12 SEZs have been approved by Govt. of India out of which 4 projects have been notified. • Haridaspur-Paradip Railway line: 78 kms, Broad Gauge Rail link is being developed jointly by Rail Vikas Nigam Limited, IDCO, Paradip Port Trust Limited and User Industries through SPV M/s Haridaspur Paradip Railway Company Limited (HPRCL). IDCO has participated in the SPV through equity contribution of Rs. 1.80 crore. Share holders Agreement has been signed Rs. 1.80 crore has already been deposited by IDCO with M/s HPRCL. • IT & Commercial Complex, Rourkela: Objective is to provide quality built-up space for IT/ITES, Corporate offices, social infrastructure such as retail & shopping, entertainment & leisure etc. About 3.0 lakh sft of built-up space over 3.12 acres of land in Civil Township has been planned. M/s Forum Projects Pvt. Ltd. Have emerged as Preferred Bidder after open competitive bidding process. IDCO Board & Govt. approval have already been obtained. Lol has been issued to the preferred bidder. • Bio-Pharma IT Park. To develop Orissa as hub of research, development and innovation in the fields of Bio-IT and Bio Pharma related areas, a dedicated Park has been planned for development at Bhubaneswar. Ac. 53.229 acres land at Andharua near Bhubaneswar is under transfer to IDCO. M/s Bharat Biotech International Limited has been selected as preferred bidder after open
  10. 10. competitive bidding process. Lease-cum-Development agreement is to be signed soon. • Petroleum, Chemical and Petrochemical Investment Region (PCPIR): An SPV namely M/s Paradeep Investment Region Development Limited has been formed for development of petroleum & petrochemical industries at Paradeep region. Indian Oil Corporation Ltd. And Paradeep Port Trust have been requested to join the SPV. M/s IL & FS have been entrusted with preparation of project documentation. Govt. of India has been requested for approval of the project. • Information Technology Investment Region (ITIR): Ministry of Communications & Information Technology, Government of India recently approved a Policy Resolution on setting-up of Information Technology Investment Region (ITIR). The Policy will help to promote investment in the IT, ITES/Electronic Hardware Manufacturing Units (EHM). The region would boost/augment exports and generate employment. Accordingly, in a meeting taken-up by the Hon’ble Chief Minister on 10.07.2008, it was decided to set-up an ITIR in Bhubaneswar. M/s IL & FS has been engaged to provide advisory services for the project. The project proposal is under Preparation. • Dhamara Industrial Township: Consequent upon establishment of Dhamra Port Company Limited (DPCL), a joint venture Company of L & T and Tata Steel and Dhamara being the deepest port of India and expected to be ready for commercial operation by sMarch, 2010 and ready availability of big chunk of Government land, the
  11. 11. Board of Directors of IDCO in the meeting held on 20.09.2008 has decided for development of a township at Dhamara to provide support to ancillary and downstream industries to come-up near the port. Acquisition of land for the project is in progress. • Info valley: 500 acres of Government land in Jatni Tahasil has been identified for development of info Vally. Government of India has accorded Formal Approval for Development of SEZ over the land. The info Valley project would be developed in PPP mode. M/s IL & FS has been engaged for preparation of project proposal and Master Plan for the same. • World Trade Centre: IPR-2007 (Para 9.12) provides that “IDCO shall promote a World Trade Center (WTC) at Bhubaneswar to promote global networking and give international visibility to the industrial potential of the State”. Accordingly, Industries Department has been requested to facilitate identification and transfer of suitable Government land foe establishment of the World Trade Centre at Bhubaneswar. • Project Management Unit (PMU) in IDCO: As per the terms of Project Development and Promotion Partnership (PDPP) agreement signed between Government of Orissa/IDCO and IL & FS for development of infrastructure in the State, a Project Management Unit (PMU) shall be functioned in IDCO. Accordingly, a PMU is functioning in IDCO under the direct supervision of the Managing Director. • Industrial Infrastructure Up-gradation Scheme (IIUS):
  12. 12. Department of Industrial Policy and Promotion (DIPP), Government of India have provided assistance to the State for development of industrial clusters under Industrial Infrastructure Up-gradation Scheme (IIUS). Accordingly, it was decided to prepare three proposals for Mancheswar, Balasore and Jharsuguda or Rourkela. IL & FS IDC has been entrusted to prepare the project proposals. One proposal i.e. for Mancheswar has already been prepared by the IL & FS and the same has been sent to the Industries Department for examination and onward submission to DIPP. Land Acquisition: IDCO is the ‘NODAL AGENCY’ for identifying and acquiring land both from Government and private parties at strategic locations. The land so acquired is allotted for industrial as well as infrastructure projects. During 09,Ac.5278.47 of land has been allotted to 28 industrial units. Some of the major industrial units allotted land during the year are as follows: Name of the Project Location Area allotted in AC. 1 2 3 4
  13. 13. s1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. POSCO-India Ltd. IFFCO OCL India Limited Rungta Mines Limited Aditya Aluminium Aditya Aluminium Aditya Aluminium Aditya Aluminium Aditya Aluminium Bhusan Energy Limited Jindal Photo Limited Jindal Steel & Power Ltd. D.P.C.L Adhunik Mettallicks Paradeep Paradeep Darpan Tahasil Jarabandha Puhundi Phuljuba Biriguda Bhalujodi Singaram Ganthigadia Deranga Kerajung Dhamra Chadrihariharpur 316.190 486.540 174.500 540.705 197.650 170.770 169.650 75.500 109.680 100.000 239.360 1535.990 875.720 62.890 s Construction activities:
  14. 14. • New works awarded to IDCO during 2008-09: 34 nos. of new works for an estimated cost of Rs. 13,953 lakh have been awarded to IDCO during the year 2008-09. Some of the major works awarded are as follows: Sl. No. Name of the work Value of work (Rs. In lakh) 1. West Stand of Sports academy, Bhubaneswar : 447.77 2. Construction of Ladies Hostel of CET, BBSR : 641.06 3. Laboratory Building, Phase-II of CET, BBSR : 766.37 4. State Transport authority Works, Cuttack : 233.77 5. Construction of centre for advance studies of BPUT : 479.12 6. Construction of Faculty Building of BPUT : 392.98 7. Construction of Administrative Building of Revenshaw University, Cuttack : 358.33 8. Building works of IIT Extension Centre, Bhubaneswar : 323.40 9. EMR Schools at Rampilo in Jajpur district : 416.21 10. Niyojan Bhawan Building, BBSR : 205.00 11. Hostel of IIT Extension Centre, BBSR : 386.00 12. Construction of Compound Wall of IIT Bhubaneswar : 486.60 13. Construction of Hostel building of OSME, Keonjhar : 911.18 14. OCAC Tower, BBSR : 2897.00 15. Construction works of Utkal University of Culture at Madanpur, Bhubaneswar : 1895.50 16. Construction of New Govt. Quarters for low paid employees at B.J.B Nagar, GA Deptt. BBSR : 691.52 Project completed: I. Infrastructure projects completed with central assistance: • IID Centre, Somnathpur (Balasore) – Expenditure – Rs. 446.47 lakh (cumulative) • Urban Haat, Puri (90% completed), Expenditure – Rs. 230.09 lakh (cumulative)
  15. 15. II. Other projects: 1. Construction of Diving Pool, warm pool & kid pool in Kalinga Stadium. 2. 18 nos. Staff Qrts. of CET, Bhubaneswar. 3. Students Activity Centre of CET. 4. 4 nos. of class room of IGIT, Saranga. 5. Construction of Academic Block of North Orissa University. 6. Construction of extension of Administrative Building of North Orissa University. 7. Building of MDC on SHE. 8. GRIDCO Building, Bhubaneswar. 9. Work of Information Commission Office at Tosali Plaza. 10. IIT Kharagpur, P.G Studies Block. 11. Construction of 200 nos. G.A. Deptt. Quarters. 12. 2 Lane approach road and box cell bridges to STA at Puri. 13. Phase A works of JNV at Paralakhemundi.s
  16. 16. TURNOVER: During the year under report, the Corporation achieved turnover of Rs. 70,905.99 lakh as against Rs. 385,93.26 lakh during the financial year 2007-08 and earned net surplus of Rs. 6553.63 lakh as against Rs. 7,260.05 lakh during the financial year 2007-08 after providing depreciation. The cumulative surplus of the Corporation stood at Rs. 283,83.02 lakh at the close of the financial year under report. The details of the turnover of the Corporation for the year 2007-08 and 2008-09 are as follows: Sl. No. Particulars Fy. 2007-08 (Rs. In lakh) 2008-09 (Rs. In lakh) A. Contract Receipts 163.44 120.81 B. Deposit Works 4769.96 8348.28 C. Land Acquisitions 28194.44 55943.87 D. Own Works 5171.34 5991.08 E. Repair & Maintenance Works 294.08 501.95 Total 38593.26 70905.99
  17. 17. THEORITICAL APPROACH TO WORKING CAPITAL MANAGEMENT CONCEPT OF WORKING CAPITAL Ever since the evolution of working capital management, several authors attempt to analyze the concept by identifying it so that the components of working capital can be properly identified. Each of these approaches has its own basis and justification. Working concept or short term financial decision typical involves cash flow within one accounting period. There are two concept of working capital. • Gross Working capital • Net working capital GROSS WORKING CAPITAL It refers to the firm’s investment in current assets. It’s a quantitative approach to define working capital. Mead Edward, Field Kenneth, Baker and Mallot suggested that working capital should be considered as current assets because: (a) Both fixed and current assets help an enterprises make profit. While fixed assets are means to produce, current assets are means to operate these fixed assets and thus generate profit. While theoretically fixed assets are termed as fixed capital investment, current assets therefore should be termed as working capital. (b) The management is generally concerned with the total amount of funds available in terms of current assets for meeting the operational requirements. The sources of fund for such current assets are treated as a different aspect. J.I Bogen considered that, working capital is the total of current assets of an enterprise which
  18. 18. circulates from one form to another, for instances, from cash to inventories, from inventories, from inventories to receivables and receivable to back into cash. Thus the capital that circulates equals the total current assets of an enterprise. Hence working capital and current assets are interchangeable terms. NET WORKING CAPITAL Authorities like Lincon, Saliers and Stevens suggested that: a) What matters in the long run is the surplus of current assets over current liabilities and not the absolute quantum of current assets. b) This concept of working capital helps the investor and creditors of an enterprise to judge its financial soundness and margin of safety. c) It’s a dependable source to meet the contingencies since the enterprise has no obligation to this amount. d) It’s useful in assessing the financial position of an enterprise possessing the same amount of current assets. According to Dr. Colin Park and Professor J.W. Gladson, working capital is defined as the excess of current assets of business (cash, accounts receivables inventories) over current items owed to employees and others (such as salaries, wages, accounts payable, taxes owed to government). It should be inferred from the qualitative concept that current assets must exceed current liabilities and then only there is working capital. On the other hand, if the current liabilities exceed current assets then working capital deficit occurs. Both gross and net working capitals have equal significance from management point of view.
  19. 19. OBJECTIVES OF WORKING CAPITAL MANAGEMENT According to Sagan’s theory of working capital management, working capital management should be linked with the objectives of liquidity and profitability of the enterprise. Sagan also suggested that working capital management should aim at stability and growth of the enterprise. Working capital management focuses on two aspects that is 1. The level of investment in current assets 2. The sources of financing the current assets Consideration for the level of investment in current assets should avoid the danger of excessive and inadequate investment in working capital. Excessive investment in current assets reduces the firm’s profitability as idle investment earns nothing. On the other hand, inadequate amount if working capital can threaten the solvency of the firm due to its inability to meet its current obligation. With changing business scenario the needs for working capital of the firm may fluctuate causing excess or shortage of working capital frequently. The management should be prompt enough to initiate an action and correct imbalances. Net working capital concept indicates the liquidity position of the firm and suggests the extent to which working capital needs may be financed by permanent sources of funds. Current assets should be sufficiently in excess of current liabilities to constitute a margin or buffer for maturing obligations with in the ordinary operating cycle of a business. In order to protect their interest, short term creditors always like a company to maintain current assets at a higher level. Net working
  20. 20. capital concept suggests for a judicious mix of long term and short term funds for financing current assets. It is a conventional rule to maintain the level of current assets twice the level of current liabilities. Every time there is a minimum amount of net working capital which is permanent. Therefore a portion of working capital should be financial with the permanent sources of fund such as equity share capital, debentures, long term debt, preference share capital or retained earnings. So the management must decide the extent to which the current assets should be financed with equity capital or borrowed funds. KIND OF WORKING CAPITAL Operating cycle is a continuous process which converts cash into sales and again those sales into cash in one accounting period. In an operating cycle activities like conversion of raw material into work in progress, work in progress into finished goods and the finished goods into cash occurs. So operating cycle constantly requires current assets. But the magnitude of current assets required is not always the same rather a variable amount of working capital is needed at different time. But still there is a minimum level of investment in current assets which is continuously required by a firm to carry on its business operations. That minimum level of current assets is called permanent or fixed working capital. However, the need for working capital over and above permanent working capital will fluctuate as extra inventory of finished goods will have to be maintained to support the peak periods of sales. On the other hand lesser investment in raw material, work in progress and finished goods are to be made when the demand
  21. 21. level sis low. This extra amount of working capital needed to support the high or low rate of production and sales activities of the firm is called variable or fluctuating working capital. Permanent working capital is stable over time while temporary working capital is fluctuating over time. However permanent working capital may be increasing 9r decreasing steadily overtime. DETERMINANTS OF WORKING CAPITAL Business activities changes with changing trends in global economy and market condition & lifestyle of people and a changing business activity has fluctuating working need from time to time. Working capital requirement of a firm is always not the same. Also all the farms don't have same working capital need at a time. There are a no of factors which a firm determine what should be level of working capital in a definite period of time. NATURE OF BUSINESS: Different types of business involve different activities which require different amount to be invested in working capital. Like, trading and financial firms have a little investment in fixed assets but require a huge investment in working capital. For example retail stores have to carry large variety of goods to satisfy varied demands of customers continuously. So they need to have a substantial amount as their working capital.s
  22. 22. However public utilities may have a limited need for working capital as they have only cash sales and supply services not product. So no funds will be tied up debtors & stocks. As for as working capital need is concerned most s organization concerned with manufacturing and construction will fall between the two extreme requirements of trading firms and public utilities. So those firms are required to invest adequately in current assets which depend upon the total assets structure and other variables. However manufacturing firms invest a substantial amount in current assets. SEASONALITY OF OPERATION The degree of fluctuation in working capital need is high in case of firms having marked seasonality in their operations. For example the demand for is at peak in winter. In order to satisfy the huge demand a so these company are said to have summer the demand for woolen garments falls sharply. And to balance the supply with the demand the woolen garment manufacturer has to produce less and hence comparatively lesser amount of working capital is required in summer by the woolen garments manufacturer. Similarly In India, the demand for gold increases in marriage season, So the gold trading agencies need to have larger variety of stocks of gold in order to satisfy varieties of needs of customers. So they have to invest more in working capital during marriage season.s
  23. 23. However a firm manufacturing products like lamps has fairly even sales throughout the year. So these companies are said to have a stable amount of working capital. AUCTION POLICY Production policy of a firm, to a large extend, determines the degree of fluctuation in working capital needs. As discussed above a firm may have pronounced seasonal fluctuation in sales because of unevenly lying demands for its products. And the firm then can adopt a variable working capital policy with a large fluctuation in working capital needs. Or it can also follow a steady or level production policy which may reduce the rate of fluctuation. For example, a manufacturer of ceiling fan faces a huge demand for its products during summer where as the demand for ceiling fan drops in winter. In order to chase the sharp fluctuating demand the sales volume also fluctuates. So the firm needs to invest more in working capital during summer and less in winter. However the firm can also adopt level production policy which involves uniform level of production of ceiling fan and store it as finished goods inventory for summer season. The decision to adopt steady or variable production policy depends upon the cost and risk of production. CREDIT POLICY The credit term, granted to the customer may depend upon the norms and conditions of the industry to which the firm belongs. However the firm itself has
  24. 24. certain degree of flexibility for shaping its credit policy provided it should be within the constraints of its industrial norms. In order to adopt more customers a firm adopts a liberal credit policy which causes the firm to have more working capital as a substantial amount of funds will have to be tied up with the debtors. However such firm should rate the creditworthiness of the existing customers and credit standing of the new customers. Otherwise there can be increased chances Of bad debts. On the other hand, firms which are required to be ensured that necessary funds are not tied up in debtors, should follow rationalize credit policy basing on the credit standard of the customers.
  25. 25. MARKET CONDITION Business and market are two very much related terms. In order to carry out a business, a perfect market response for the product is required by the concerned organization. One aspect of market condition is the degree of competition prevailing in the market which has a remarkable influence on working capital needs of a firm. When competition is keen, when a firm wants to attract more customer or grab a larger market share, it is required to serial the customers instantly and adequately so that customers need not wait because other manufacture are ready to meet their needs and for that a larger inventory of fix shed goods is required. Another aspect of market condition is economy. If economy swings in the up word direction, the pattern of consumption of customers changes, and they response more positively towards various product. And to handle such situation firms need to carry more working capital with them. CONDITIONS OF SUPPLY: The inventory or raw materials, spares and stones depend on the conditions of supply. If the supply is prompt and adequate the firm can manage with small invention. However if the supply is unpredictable and slant, then the firm, to ensure continuity of production, would have to acquire stocks as and when they are available and carry larger inventory on an average. So a substantial amount is needed to be tied up in inventory. Similar policy may have to be followed when the
  26. 26. raw material is available only seasonally and production operations are carried out throughout the year. OPERATING EFFICIENCY The efficiency in controlling operating cost and utilizing fixed and current assets leads to operating efficiency. Better utilization of resources improves profitability and thus helps in releasing the pressure on working capital. Through it may not be possible for a firm to control prices of material and wages of labour, it can certainly ensure effective and efficient utilization of material labour and other resources. CE LEVEL CHANGES Generally raising level or price will require a firm to maintain higher amount of working capital. Some levels of current assets will require increase investment when prices are rising. However companies that can immediately revise their production policy with raising price level will not face a severe working capital problem. BALANCED WORKING CAPITAL POSITION Proper forecasting and estimation of working capital needs of a firm contributes more towards its operating efficiency and hence improves profitability. A firm should have just adequate amount of working capital as excessive as well as inadequate working capital are dangerous for the firm from the management point of view.
  27. 27. DISADVANTAGES OF EXCESSIVE WORKING CAPITAL Excessive working capital means holding cost and idle fund which earn no profit. The disadvantages of excessive working capital can be described as follows • If results in unnecessary accumulation of inventories which causes increase in carrying cost leading to increase in operating expenses. Carrying excessive inventory leads to increase chances of inventory mishandling, waste, theft and loses. • Carrying excessive working capital is an indication of defective credit policy and slack collection period. If excess funds are tied up with debtors without measuring the creditworthiness of the customers, chances of bad debt results as the enterprise seldom went to court of law for recovery of the funds as the litigation is fairly costly and justice is prolonged. • Financing excessive working capital creates unnecessary accumulation of interest and taxes. • Excessive working capital makes management complacent which degenerates into managerial inefficiency.
  28. 28. • Tendencies of accumulating inventories tend to make speculative profit grow. This may tend to make dividend policy liberal and difficult to cope with in future when the firm is not able to make speculative profit. DANGER OF INADEQUATE WORKING CAPITAL Paucity in working capital not only impairs the firm's profitability, but also results in production interruptions and inefficiencies and sales disruptions. Lenders consider a positive net working capital as a measure of safety. Inadequate working capital has the following dangers: • It hampers growth. It becomes difficult for the firm 0 exploit favorable market situation for non availability of working capital funds. • It becomes difficult to implement operating plans and achieve the firm's profit target. It sets limits to any decision involving blocking of fund. • Operating inefficiencies creep in when it becomes difficult even to meet day to day commitments. It affects the firm's reputation and good will. • Current assets are means to operate the fixed assets and generate profit. So for the lack of working capital, fixed assets are not efficiently utilized. Thus the firm's profitability would deteriorate.
  29. 29. • Inadequacy of working capital funds render the firm unable to avail attractive credit opportunities etc. • Inadequacy may cause the firm unable to face irregularities in supply, lengthy procurement time etc. • The firm loses its reputation when it is not in a position to honour its short term obligations. As a result the firm faces tight credit terms. OPERATING CYCLE The need for working capital to run the day to day business activities cannot be overemphasized. And the most appropriate method of calculating the working capital needs of a firm is the concept of operating cycle. The need for current assets is felt constantly because of the operating cycle. Operating cycle is the time duration required to convert sales after the conversion of resources into, into cash. Earning a steady amount of profit requires a firm to carry out successful sales activity. So the firm has to invest enough funds in current assets for generating sales. Absence of current assets is felt because sales do not get converted into cash instantaneously. So there is always an operating cycle involved in the conversion of sales into cash. The operating cycle of a manufacturing firm involves the following three phases: i. Phases of acquisition of resources which involves acquisition of raw material, labour, power, fuel etc.
  30. 30. ii. Phase of manufacturing of the product which involves conversion of raw material into work in progress into finished goods iii. Phase of selling of products which involves selling either for cash or credit. Credit sale creates account receivable for collection. Gross Operating Cycle (GOP) involves: i. Inventory Conversion Period (ICP) and ii. Debtors Conversion Period(DCP) Inventory conversion period is the time required for producing or selling of the products. ICP includes: a) Raw Material Conversion Period (RMCP): it is the average time period taken to convert raw material into work in progress. RMCP= Raw Material Inventory/Raw Material Consumption per day b) Work In Progress Conversion Period (WICP): it is the average time taken to complete the semi finished or work in progress. WICP is given by: WICP= Work in progress inventory/cost of production per day c) Finished Goods Conversion Period (FGCP): it is the average time taken to sell the finished goods. It can be calculated as: FGCP= Finished goods inventory / cost of goods sold per day
  31. 31. The Debtors Conversion Period (DCP) is the time required to collect the outstanding amount from the customers. It can also be described as the average time taken to convert debtors into cash. DCP is calculated as: DCP= debtors/credit sales per day Net Operating Cycle (NOC) is the difference between Gross Operating Cycle (GOC) and Creditors (Payables) Deferral Period (CDP) NOC=GOC- CDP If depreciation is excluded from NOC, Cash Conversion Cycle (CCC) results, which involves cash flow associated with conversion at cost. (Some people argue that depreciation should be excluded while computing CCC, as depreciation is not a cash item). In case of non manufacturing firms such as wholesalers and retailers, is no manufacturing phase. They just acquire stock of finished goods and convert them into debtors and then debtors into cash. Further service and financial enterprises will not have inventory of goods and cash will be there inventory. Their operating cycle will be the shortest. They need to acquire cash, then lend (create debtors) and convert lending into cash.
  32. 32. SOURCES OF WORKING CAPITAL The sources of finance that are used to support current assets can be broadly divided into ten sections. These are described one by one below. ACCRUALS Accrued expenses represent a liability that a firm has to pay for the services which it has already received. Since no interest is paid by the firm, and since accrued expenses respond more or less automatically to the changes in the level of activities, so they represent a spontaneous and interest free resources of financing. The most important components of accruals are wages and salaries, taxes and interest. Accrued expenses represent obligations payable by the firm to its employees. However the employees are paid afterwards, usually at some fixed interval like one month. Legal and practical aspects constraints the flexibility of a firm in lengthening the payment interval. Similarly accrued taxes and interests another source of financing. Taxes are paid quarterly after the profit is earned by the firm. Likewise interest is paid periodically during a year while the firm continuously uses the borrowed funds.
  33. 33. Accrued expenses are limited source of short term financing and the firm does not have much control over their frequency and magnitude. interest free resources of financing. The most important components of accruals are wages and salaries, taxes and interest. Accrued expenses represent obligations payable by the firm to its employees. However the employees are paid afterwards, usually at some fixed interval like one month. Legal and practical aspects constraints the flexibility of a firm in lengthening the payment interval. Similarly accrued taxes and interests another source of financing. Taxes are paid quarterly after the profit is earned by the firm. Likewise interest is paid periodically during a year while the firm continuously uses the borrowed funds. Accrued expenses are limited source of short term financing and the firm does not have much control over their frequency and magnitude. TRADE CREDITS Trade credit represents the credit extended by the supplier of goods and service. In India, it contributes to about one third of the short term financing. Particularly small firms are heavily dependent on trade credit as a source of finance as they find it difficult to raise funds from banks or other's sources in capital market. Trade credit is granted on an open basis where a supplier sends goods to the buyer on
  34. 34. credit and the buyer accepts and, in effect, agrees to pay the amount dues as per sales terms in the invoice. Open account trade credit appears as sundry creditors Trade credit may als5-take the form of bills payable where the buyer signs a bill to obtain trade credit. BANK FINANCE FOR WORKING CAPITAL Banks are the main institutional source of working capital finance in India. A bank may consider a firm's sales and production plan and the desirable levels of current assets. A firm can draw funds from its banks in the form of overdraft, cash credit, bills purchasing or discounting and working capital loan. OVERDRAFT Under this facility, the borrower is allowed to withdraw funds in excess of the balance in his current account up to a certain specified limit during a stipulated time period. The borrower can withdraw and repay funds whenever he/she desires within the overall stipulation. The overdrawn amount is repayable on demand, but they generally continue for a long period of time by annual renewals. It's a very
  35. 35. flexible arrangement from borrower's point of view. Interest is charged on daily balances subject to some minimum charges. CASH CREDIT This facility allows a borrower to withdraw funds from the bank up to the sanctioned credit limit. The borrower can draw periodically to the extent of his requirements and repay by depositing surplus fund in his cash credit account. Interest is payable on the amount actually utilized by the borrower. Sanction is made by the bank against the securities of current assets. PURCHASE OR DISCOUNT OF BILLS Under this facility, bank provides credit to the borrower against its bill. The purchase or discounts the bill and the amount provided under this agreement is covered within the overall cash credit or overdraft limit. Here the bank holds the bill as security for the credit. When a bill is discounted, the discounted amount (full amount minus discounted charges) is paid to the borrower and the bank collects its full amount on maturity. LETTER OF CREDIT
  36. 36. A letter of credit is an arrangement whereby a bank helps its customer to obtain credit from its (the customer's) suppliers. When a bank opens a letter of credit in favour of its customers for some specific purchase, the bank undertakes the responsibilities to honour the obligations of its customer, if the customer fail to do so. It's an indirect financing where the bank will make payment to the supplier on behalf of its customer only when he fails to do so. Bank charges the customer for opening the letter of credit. WORKING CAPITAL LOAN A borrower can access funds in excess of sanctioned credit limit rough a Demand loan Account where the borrower is required to pay a }her rate of interest above the normal rate of interest. PUBLIC DEPOSITS Many firms, large and small, have solicited unsecured deposits from the public in recent years, to finance their working capital needs. According to The Companies (acceptance of deposits) Amendment rules 1978; public deposit cannot exceed 25% of share capital and free reserves. And the maximum maturity period is allowed for public deposit is 3 years and the minimum is six months. However, for non banking financial corporations, the maximum permitted maturity period is 5years.
  37. 37. From the companies' point of view, public deposit is an advantage as there is no security offered against the public deposit. TER CORPORATE DEPOSITS A deposit made by one company with another, normally for a period of six months is referred to as inter corporate deposits. Such deposits are of three types. Call deposit which is withdrawable by a lender on giving a day's notice. The interest rate on these deposits may be around 10 percent. Three months deposits are taken by the borrowers to tide over a short term cash inadequacy that may be caused due to disruption in production, excessive import of raw material, tax payment, delay in production, dividend payment and unplanned capital expenditure. The interest rate is around 12 percent. These deposits are taken by the borrowers to tide over a short term cash inadequacy that may be caused due to disruption in production, excessive import of raw material, tax payment, and delay in collection, dividend payment and unplanned capital expenditure. SHORT TERM LOANS FROM FINANCIAL INSTITUTIONS The Life Insurance Corporation of India, The General Insurance Corporation of India, and the Unit Trust of India provide short term loans to manufacturing company with an excellent track record and satisfying certain conditions. The
  38. 38. company having declared an annual dividend of not less than 6 percent for the past five years and the companies having debt equity ratio not more than 2:1 is eligible to be provided with short term finances. Short term loans are unsecured and are given on the strength of a demand promissory note. COMMERCIAL PAPER Commercial Paper represents short term unsecured promissory notes issued by firms which enjoy a fairly high credit rating. In the USA commercial paper market is a blue chip market where large firms with considerable financial strength are able to issue commercial paper. RBI has introduced the commercial paper scheme in Indian money market in 1989. The buyers of commercial paper include banks, unit trusts, insurance companies and firms with surplus funds to invest in short term securities. Companies having a net worth of Rs. 10 crore and maximum permissible bank finance of not less than 25 crore and which are listed in stock exchange are eligible to issue commercial paper. The maturity period of commercial paper is 91 to 180 days in India. FACTORING
  39. 39. A Factor is a financial institution which offers service relating to management and financing of debts arising out of credit sales. In India, the SBI factoring and Commercial Services. Limited and Can bank Factoring Limited have been mandated by the Reserve Bank of India to operate in the western region and the southern region respectively.The factor selects the account of the client and establishes the credit limits applicable to the selected accounts and also assumes the responsibilities for collecting the debt of accounts handled by it. RIGHT DEBENTURES FOR WORKING CAPITAL Public limited companies can issue rights debenture to their shareholders with the object of augmenting the long term resources of the company for working capital requirements. The debenture shall be offered to the existing Indian resident shareholders of the company on a pro rata basis. The amount of debenture should not exceed 20 percent of the gross current assets, loans and advances minus the long term funds presently available for financing working capital 20 percent of paid up share capital including preference capital 'arid free reserves, whichever is lower of the two. s
  40. 40. DEFERRED INCOMES Deferred income represents funds received by the firms for goods and services which it has agreed to supply in future These receipts increase the firms liquidity in the form of cash; therefore they constitute an important sources of financing. Advance payments made by customers constitute the main item of deferred income. These payments are common in case of expensive unit products, large contractors or when the product is in short supply and the seller has a strong bargaining power.
  41. 41. DEBT MANAGEMENT IN IDCO IDCO has become a zero-debt company, following the repayment of 3rd and final installment on 14.5% non-convertible, redeemable secured debentures, amounting to Rs. 214.39 cr. On March 25, 2005. At the beginning of 2004-05, IDCO has loans amounting to Rs. 654.39 cr. However, the company has been able to repay the entire loan amount with prudent financial management, coupled with increased production and realization. IDCO had also achieved the zero debt status in September 1999, when the company had successfully discharged the last foreign currency loan of 20 billion Japanese yen plus. Interest, which in Indian currency worked out to Rs. 627.64 cr. (principal) and Rs. 11.86 cr. (interest). The company had borrowed a consortium of international banks to finance its initial project costs. FINANCIAL ANALYSIS OF IDCO A. CALCULATION OF GROSS OPERATING CYCLE PERIOD FOR AND 2008-09 AND 2009-10 The following formula is used to express the framework for the operating cycle: 0 = (R+W+F+D) – C Where, 0 = Operating Cycle Period
  42. 42. R = Raw material conversion period W = Work-in-progress conversion period F = Finished goods conversion period D = Debtor collection period C = Creditor collection period R = Raw material inventory Raw material consumed per day Raw material inventory = average raw material = (Opening stock of raw material + closing stock of raw material) / 2 = (65.59 + 68.38) / 2 = 66.99 (65.39 + 68.38) / 2 X 360 In 2009-10 R = 696.76 = 66.99 X 360 = 34 days 696.76 Work-in-progress /finished goods conversion period = Average work-in-progress/finished goods *360 Total cost of goods sold Total cost of good sold = Operating stock of inventory + raw material purchased + power & fuel + depreciation + other mfg. expenses – closing inventory.
  43. 43. In 2009-10 cost of goods sold = 686.65 + 696.76 + 1311.55 + 771.06 + 250.52 + 272.44 + 174.98 + 103.33 – 841.90 = 3425.39 Work in progress/finished goods conversion period = (266.93 + 362.90)/2 X 360 3425.39 = 33.096 = 33 days Debtors / Average Debtors * 365 Credit Sales – (Gross Sale – Exercise duty). [P/L A/c] 2008-09 = (60.65 + 26.50) / 2 X 360 5094.52 = 3.07 = 3 days GROSS OPERATRING CYCLE PERIOD: 2008-09 = 34+33+3 = 70 days Interpretation: It implies that locking up of funds in current assets is for 70 days. IDCO can obtain greater mileage for each rupees invested in current assets. The shorter the duration of operating cycle period, faster is the transformation of current assets into cash.
  44. 44. B. RATIO ANALYSIS Ratio Analysis is one of the powerful tools for financial analysis. Following are the worked out and analyzed the financial ratio of IDCO. 1. LIQUIDITY RATIOS Current ratio = Current asset/ current liabilities We can state that the ratio has been decreased due to an increase in current liabilities as compared to the previous year. Though the level of current assets in comparison to the previous year has been reduced, still the company is in a better position to meet the current liabilities as the current ratio of 2 to 1 or more is considered satisfactory. Acid-Test Ratio / Quick Ratio: Quick Ratio = (Current asset – inventories) / current liabilities 2008-09 = 5,041.33 – 6,86.65 1,1,540.88 = 2.82 2009-10 = 4,528.81 – 8, 41.90 / 1,933.24 = 1.907 Cash Ratio: Cash Ratio = Cash + Marketabl Securities Current Liabilities 2008-09 = 3516.46 + 0/1540.88 = 2.28 2009-10 = 2,869.04 + 0 / 1,933.24 = 1.48 Interpretation Cash ratio is one of the significant measures of a firms ability to meet the current obligations as cash is the most liquid asset. In 2009-10 the liquidity position of the company has been deteriorated. Interval Measure Ratio = Current Asset - Inventory
  45. 45. Average daily operating expenses Average daily operating expenses = (cost of goods sold + selling & distribution expenses + administrative & general expenses – depreciation) / 360 Cost of goods sold = opening inventory + raw material purchased + labour + other mfg. expenses + depreciation – closing inventory In 2008-09: (634.96 + 574.36 + 994.69 + 231.54 + 552.97 + 163.82 – 686.65 + 84.74 + 106.74 + 113.97) / 360 = 2771.14 / 360 = 7.7 In 2009-10 (686.65 + 696.76 + 1311.55 + 250.52 + 771.06 + 174.98 – 841.90 + 84.33 + 103.33 + 123.10)/ 360 = 9.334 In 2008-09: = 5041.33 – 686.65 7.7 = 4354.68 7.7 = 566 days In 2009-10: = 4528.81 – 841.90 9.3 = 396.441 = 396 days Interpretation: We can conclude from the interval measure ratio that IDCO has sufficient liquid assets to finance its operation for 566 days (which is far more than a year) even if it doesn’t receive any cash.
  46. 46. 2. TURNOVER RATIOS Debtors Turnover Ratio: Debtors Turnover Ratios = Net Sales / Debtors In 2008-09: = 49880/60.65 = 82.25 In 2009 – 10: = 5094.52 = 192.25 26.50 Inventory Turnover Ratio: Inventory Turnover Ratio = Cost of good sold Average Inventory Cost of goods sold = Opening inventory + raw materials purchased + labour + depreciation + other mfg. expenses – closing inventories. In 2008-09: 634.96 + 574.36 + 994.69 + 231.69 + 552.97 + 281.10 + 163.82 – 686.65 = 2746.94 In 2009-10: 686.65 + 696.76 + 1311.55 + 771.06 + 272.44 + 174.98 – 841.90 = 3071.54 In 2008-09: (634.96 + 686.65) / 2 = 660.8 In 2009-10: (686.65 + 841.90) / 2 = 764.28 Inventory turnover ratio in 2008-09 = 2746.94 / 660.8 = 4.2 Inventory turnover ratio in 2009-10
  47. 47. = 3071.54 / 764.28 = 4.01 3. LEVERAGE RATIO Debt-asset Ratio = Total Debt Net Asset We can state here that in the year 2003-04 that 13% of the capital was financed by the lenders in IDCO and the rest 87% was of IDCO’s capital employed. IDCO has been termed as a zero-debt company since 2005-06 because it has cleared off all its debts on March 25, 2005. Debt – Equity Ratio = Total Debt Net Worth The debt-equity ratio of IDCO for the year 2008-09 is zero since it has cleared off all debts. Cash to Sales Ratio = Cash + Marketable Securities Sales In 2008-09: (3516.46 – 167.78) + 0 4988.80 = 3348.68 + 0 4988.80 = 0.67 In 2009-10: (2869.04 – 220.93) + 0 5094.52 = 2648.11 5094.52 = 0.51 In can be concluded that to achieve sales of Rs. 4988.80 crores, company has sufficient cash. Cash to Current Assets = Cash + Marketable Securities Current Assets
  48. 48. In 2008-09: (3516.46 – 167.78) + 0 5041.33 = 3348.68 + 0 5041.33 = 0.66 In 2009-10: (2869.04 – 220.93) + 0 4528.81 = 2648.11 4528.81 = 0.58 It can be concluded that cash constitutes about 70% of current assets.
  49. 49. C. Calculation of Working Capital: 2009 2010 Current Asset Inventories 686.65 841.90 Sundry debtors 60.65 26.50 Cash and bank balance 3516.46 2,869.04 Other current assets 236.47 175.35 Loans and advances 541.10 616.02 Total 5,041.33 4,528.81 Current Liabilities Sundry Creditors 324.94 1,147.97 Other liabilities 557.90 306.14 Provisions 222.57 329.84 Total 1,268.1 1,783.95 Working Capital 3,773.23 2,744.86 of 2009 Each Item as % of WC Current Assets Inventories 18.2 30.67 Sundry debtors 1.60 0.96 Cash and bank balance 93.19 104.52 Other current assets 6.26 6.39 Loans and advances 14.03 22.44 Total 133.06 164.98 Current Liabilities Sundry Creditors 8.06 41.82 Security deposits 4.3 11.15 Other Liabilities 14.8 - Provisions 5.9 12.01 Total 33.6 64.98 Working Capital 100 100
  50. 50. Analysis of items of Current Asset and Current Liabilities as a percentage of working capital Figure Interpretation: The level of current assets has been increased where as working capital has been decreased as compared to previous year. Current assets are more than current liabilities maintaining a positive working capital ratio in the last two finance years. Figure: interpretation: Inventories with working capital is increasing in 2008-09. The inventory level in 2007-08 was 18.20% of working capital and it was 30.67 in the year 2008-09. Stock of the company is forming a major part of working capital. 2007-08 2008-09 S.T.R = COGS / AS S.T.R = COGS /AS = 4.2 times = 4.1 times It indicates an even turnover over a period of two years. In 2009-10, the percentage of inventory has increased many times than that of the previous year. Figure: Interpretation: Percentage of Sundry Debtors to the total working capital in the year 2007-08 is 1.60% of the total working capital and in the year 2009-10, it came down to 0.96% of the total working capital. Decrease in the sundry debtors is good, provided there is simultaneous increase in cash position, but the cash position
  51. 51. has decreased indicating there is no cash sale and the company is not in favour of credit sales. Figure: Interpretation: In 2009-10, having 104.52% of current assets as cash and bank balance, IDCO has a better liquidity position to make the current expenses. 104.52% cash and bank balance indicates that IDCO is a safety desiring company. However, other short term financial investment can be done with the surplus funds in order to generate more return on equity.
  52. 52. LIST OF TABLES AND FIGURES Previous Year Rs. Liabilities SCH Current Year Rs. RESERVE & SURPLUS 1,072,769,000.0 0 Infrastructure Development Fund 1,072,769,000. 00 Add: transferred During Current Year INCOME & EXPENDITURE A/C - 1,072,769,000.00 1,110,169,326.2 1 Net Surplus as per last Balance Sheet 1,765,532,719. 71 Less: Last year Income Tax paid in Current year 49,626,606.00 655,363,393.50 Add: Net Surplus During Current year 633,460,175.3 2 1,765,532,719.7 1 2,349,366,289.03 2,838,301,719.7 1 3,422,135,289.03 RECEIPT ON CAPITAL ACCOUNTS 17,863,847,625. 00 Infrastructure Receipts 1 2 21,698,836,648.6 5 - LOANS 5,000,000.00 Other Loans 1 3 5,000,000.00 5,000,000.00 5,000,000.00 DEPOSITS 35,250,000.00 Grant/Subsidies received (Revenue) 1 4 15,250,000.00 1,184,837,600.0 0 Grant/Subsidies received (Capital) 1 5 1,094,621,580. 00 1,220,087,600.0 0 1,109,871,580.00
  53. 53. CURRENT LIABILITIES & PROVISIONS On account of 1,388,650,971.5 1 Deposits from clients 1 6 1,818,637,146. 85 - - - 43,326,625.61 Establishment & Others 45,203,668.61 152,350,334.92 Retention Money 178,299,455.9 2 1,584,327,932. 04 2,042,140,271.3 8 23,511,564,87 6.75 TOTAL 28,277,983,789. 06 Accounting policies and Notes on Accounts 2 3 Previous Year Rs. Assets SCH Current Year Rs. FIXED ASSETS 1,088,498,874.5 6 At cost 1 1,349,053,000.8 5 513,900,805.19 Less Depreciation to date 661,234,876.32 574,598,069.3 7 687,818,124.5 3 INFRASTRUCTURE EXPENDITURE 93,551,365.29 Buildings 399,963,380.01 Development of Industrial Areas 2 358,944,057.93 165,149,286.77 Construction of Industrial Sheds 3 165,149,286.77 14,217,541,991. 60 Capital exp. For land acquisition 5 18,200,686,632. 60 507,404,259.9 3 Construction work in Progress 4 520,757,076.93 15,383,610,28 19,245,537,05
  54. 54. 3.60 4.23 CAPITAL EXPENDITURE 12,865,000.00 Lease Hold Land from Govt. of Orissa 16,345,559.00 2,334,823.50 Free hold land 2,334,823.50 121,756,686.00 Construction work in progress (out of own fund) 240,458,698.00 1,363,588,915.1 2 Construction work in progress (from grants & subsidy) 1,430,282,233.4 7 1,500,545,424.6 2 1,689,421,313. 97 2,001,600.00 INVESTMENTS CURRENT ASSETS, LOANS AND ADVANCES 2,001,600.00 Current Assets 1,331,664.39 Store Materials 1,197,852.39 21,024,666.38 Receivables 6 76,464,263.37 5,689,875,415.0 6 Cash & Bank balances 7 5,951,858,280.3 1 5,712,231,745.8 3 6,029,520,396. 07 LOANS AND ADVANCES 150,158,961.7 2 Advance to Suppliers & Contractors 8 127,106,659.72 18,917,133.28 Misc. Advances Recoverable in cash 9 19,993,022.28 29,325,105.13 Advance to staff members 1 0 28,031,966.52 140,176,553.20 Sundry advances including other deposit 1 1 448,553,651.74 338,577,753.3 3 623,685,300.2 6 23,511,564,87 6.75 TOTAL 28,277,983,78 9.06 Schedules 1 to 23 form an integral part of the Accounts
  55. 55. Previous Year Rs. Expenditure SCH Current Year Rs. 180,704,024.50 Establishment Expenses 17 321,542,927.60 89,270,401.24 Administrative Expenses 18 83,898,990.15 - Intt. On loan paid - 269,974,425.74 405,441,917.75 81,082,339.88 Infrastructure Maintenance Expenses 19 93,631,155.90 6,976,278.84 Contract Work Expenses 16,358,237.00 65,523,369.00 Work Expenses 20 28,488,340.00 - VAT Paid - 100,843.00 Audit Fees & Expenses 21,736.00 72,792,486.00 Depreciation 149,566,479.82 898,763,393.50 Gross surplus 959,642,743.32 1,395,213,135. 96 TOTAL 1,653,150,609.79 Less: Income Tax prov. For Current year 243,400,000.0 0 (i) Transferred to ‘Infrastructure Development Fund’ 326,182,568.00 655,363,393.5 0 (ii) Net Surplus transferred to Balance sheet 633,460,175.32 898,763,393.5 0 TOTAL 959,642,743.32 Accounting policies and Notes on Accounts 23
  56. 56. Previous Year Rs. Income SCH Current Year Rs. 99,542,014.24 Income from work 21 109,586,341.00 711,519,198.72 Income from I/Es & Admn. Ch. 22 912,464,592.55 584,151,923.00 Other Income 631,099,676.24 1,395,213,135. 96 TOTAL 1,653,150,609.79 898,763,393.5 0 Gross surplus 959,642,743.32 898,763,393.5 0 Total 959,642,743.32 Schedules 1 to 23 form an integral part of the Accounts
  57. 57. Sl. No . Description Gross Value Cost as at 1.4.2009 (Rs.) Addition during the year (Rs.) Deductions during the year (Rs.) Total cost as at 31.03.2010 (Rs.) 1. Industrial Roads 118,348,604.93 145,322,518.00 - 263,671,122.93 2. Water Works 118,335,284.00 - 118,335,284.00 3. Electrical Installations 49,018,849.00 11,609,258.00 - 60,628,107.00 4. Infra Building- Tower 2000 72,767,893.00 242,182.00 73,010,075.00 5. Infra Buildings- Infocity 146,108,944.92 32,388.00 146,141,332.92 6. Infra Buildings- Fortune Tower 314,444,593.22 93,657,805.29 408,102,398.51 TOTAL 819,024,169.07 250,864,151.2 9 - 1,069,888,320.3 6 GENERAL ASSETS 1. W/S system at Duburi, Jajpur 75,623,953.05 252,211.00 75,876,164.05 2. Administrative Building 60,407,841.00 8,274,098.00 68,681,939.00 3. Other Office Buildings 16,776,045.26 16,776,045.26 4. Residential Houses 24,180,734.72 642,639.00 24,823,373.72 5. Plant and Machineries 18,786,075.33 110,400.00 18,675,675.33 6. Motor vehicles - - a. Jeeps 2,281,988.27 2,450,208.00 1,061,112.00 3,671,084.27 b. Cars 10,055,110.47 965,000.00 9,090,110.47 c. Trekkers 246,850.47 246,850.47 d. Trucks 1,308,811.61 1,308,811.61 e. Bus 1,943,701.15 1,943,701.15 7. Tractors and Trailers 164,114.88 164,114.88
  58. 58. 8. Water Tankers 50,104.63 50,104.63 9. Furnitures & Fixtures 3,458,928.09 72,027.00 3,530,955.09 10 . Office Equipments 5,944,389.36 1,994.00 5,946,383.36 11 . Club Equipments 61,961.50 61,961.50 12 . Survey Equipments 189,949.69 189,949.69 13 . Laboratory Equipments 663,991.96 663,991.96 14 . Electrical Equipments 7,653,389.06 197,372.00 7,850,761.06 15 . Electronics Equipments 509,533.00 1,600.00 511,133.00 16 . Tools & Implements 1,054,106.59 370.00 1,054,476.59 17 . Computers & Peripherals 26,503,224.10 157,611.00 26,660,835.10 18 . Cameras 5,362,707.00 13,595.00 5,376,302.00 19 . Cycles 37,240.70 37,240.70 20 . Weed Cutting Boat 5,650,949.00 5,650,949.00 21 . Books & Library 68,482.00 13,889.00 82,371.00 22 . Motor Cycles 490,522.60 251,127.00 239,395.60 TOTAL 269,474,705.49 12,077,614.00 2,387,639.0 0 279,164,680.49 GRAND TOTAL 1,088,498,874.5 6 262,941,765.2 9 2,387,639.0 0 1,349,053,000.8 5 Previous years figures 1,015,010,058.2 3 73,523,346.33 34,530.00 1,088,498,874.5 6
  59. 59. Depreciation Written Down Value As at 1.4.2009 (Rs.) For the year (Rs.) Adjustment during the year (Rs.) Total as at 31.3.2010 (Rs.) As at 31.3.2010 As at 31.3.2009 49,738,130.20 19,260,204.00 68,998,334.20 194672788.73 68610474.73 96,332,762.18 22,002,521.82 118,335,284.00 0.00 22002521.82 33,414,239.38 3,715,739.00 37,129,978.38 23498128.62 15604609.62 28,579,186.00 4,431,118.00 33,010,304.00 39999771.00 44188707.00 50,227,358.00 9,591,398.00 59,818,756.00 86322576.92 95881586.92 105,250,850.0 0 30,285,155.00 135,536,005.00 272566393.51 209193743.22 363,542,525.7 6 89,286,135.82 - 452,828,661.5 8 617,059,658.7 8 455,481,643.3 1 - - - 25,255,899.00 50,494,160.00 75,750,059.00 126105.05 50368054.05 26,487,802.05 3,925,631.00 30,413,433.05 38268505.95 33920038.95 13,835,013.28 294,104.00 14,129,117.28 2646927.98 2941031.98 10,013,831.64 724,412.00 10,738,243.64 14085130.08 14166903.08 10,512,259.74 1,241,073.00 105,994.35 11,647,338.39 7028336.94 8273815.59 - 0.00 0.00 1,164,777.69 351,348.00 987,409.96 528,715.73 3142368.54 1117210.58 7,215,330.64 425,967.00 889,901.59 6,751,396.05 2338714.42 2839779.83 246,543.29 47.00 246,590.29 260.18 307.18 1,306,541.74 341.00 1,306,882.74 1928.87 2269.87 1,943,701.15 1,943,701.15 0.00 0.00 164,089.19 4.00 164,093.19 21.69 25.69 50,081.81 10.00 50,091.81 12.82 22.82 2,570,482.79 94.060.00 2,664,542.79 866412.30 888445.30 5,455,096.06 73,694.00 5,528,790.06 417593.30 489293.30 43,564.85 2,760.00 46,324.85 15636.65 18396.65 185,553.31 660.00 186,213.31 3736.38 4369.38 626,381.69 5,642.00 632,023.69 31968.27 37610.27 7,652,004.91 156,545.00 7,808,549.91 42211.15 1384.15 494,355.45 5,034.00 499,389.45 11743.55 15177.55 1,003,502.33 7,647.00 1,011,149.33 43327.26 50604.26 22,576,926.64 2,450,175.00 25,027,101.64 1633733.46 3926297.46 5,357,949.61 5,506.00 5,363,455.61 12846.39 4757.39 31,810.93 815.00 32,625.93 4614.77 5429.77 5,650,949.00 5,650,949.00 0.00 0.00 50,040.00 16,699.00 66,739.00 15632.00 18442.00 463,790.64 4,010.00 249,102.79 218,697.85 20697.75 26731.96 150,358,279.4 3 60,280,344.00 2,232,408.6 9 208,406,214.7 4 70,758,465.75 119,116,426.0 6
  60. 60. 513,900,805.1 9 149,566,479.8 2 2,232,408.6 9 661,234,876.3 2 687,818,124.5 3 574,598,069.3 7 441,142,150.5 5 72,792,486.00 33,831.36 513,900,805.1 9 574,598,069.3 7 573,867,907.6 8
  61. 61. SCH -4: CONSTRUCTION WORK-IN-PROGRESS (OUT OF OWN FUNDS) Previous Year Code Particulars Current Year 1,644,845.93 50101 8 Alluminium park, Khurda 1,644,845.93 117,452,376.0 0 50102 5 Kalinga Nagar Infra Dev. work 120,288,457.00 1,921,160.00 50102 6 Infopark compound wall 1,921,160.00 339,513,616.0 0 50103 1 2nd IT Park (Knowledge Park) 345,736,948.00 3,588,772.00 50103 6 Improvement of IDCO Exhibition Ground 5,960,276.00 6,223,735.00 50103 7 Aluminiumpark, Angul, JV with NALCO 6,491,135.00 1,247,200.00 50103 8 Exp. On IIU Scheme 2,901,700.00 1,685,400.00 50103 9 Projects TH. PPP Mode 1,685,400.00 2,000.00 50104 0 Rehabilitation Colony, Mantira, Duburi 2,000.00 33,672,521.00 40300 5 IT & Corporate Tower with ICE Mall 33,672,521.00 452,634.00 40101 4 STP, Balasore 452,634.00 507,404,259.9 3 Total 520,757,076.93 Schedule -2: CAPITAL EXPENDITURE TOWARDS DEVELOPMENT OF INDUSTRIAL ESTATES Sl. No. Description Expenditure up to the end of previous year (Rs.) 1. Development Expenditure 399,963,380.01 Total 399,963,380.01
  62. 62. Schedule -3: CAPITAL EXPENDITURE TOWARDS CONSTRUCTION OF INDUSTRIAL SHEDS Sl. No. Description Expenditure up to the end of previous year (Rs.) 1. Development Expenditure 165,149,286.77 Total 165,149,286.77 As at March 31st , 2010 Expenditure during the year (Rs.) Total Expenditure (Rs.) Deductions (written back) (Rs.) Net (Rs.) 44,834,436.92 444,797,816.93 85,853,759.00 358,944,057.93 44,834,436.92 444,797,816.93 85,853,759.00 358,944,057.93
  63. 63. As at March 31st 2010 Expenditure during the year (Rs.) Total Expenditure (Rs.) Deductions (written back) (Rs.) Net (Rs.) - 165,149,286.77 - 165,149,286.77 - 165,149,286.77 - 165,149,286.77 Schedule -5 Capital Exp. FR. Land Acquisition. Previous year Rs. Code No. Particulars Current year Rs. 883,168,418.00 502003 LA for Duburi Steel Complex 1,013,127,896.00 1,050,892,548.00 502004 LA for projects (Govt. Land for Industries) 1,240,214,929.00 141,880.00 502006 LA Exp. For PCPIR Project, Paradeep 141,880.00 210,546,447.00 502007 LA Exp. For Land Bank 812,762,897.00 87,282,455.00 502001 LA Exp. For Projects-Govt. 87,282,455.00 11,985,510,243.6 0 502002 LA for projects (Private Land for Industries) 15,046,329,370.6 0 502005 Exp. On Infrastructure Dev. of Land 9,035.00 502008 Exp. For Logistic Support-POSCO LA work 818,170.00 14,217,541,991.6 0 TOTAL 18,200,686,632.6 0 Schedule -6: Receivables Previous year Rs. Code No. Particulars Current year Rs. 16,422,990.59 304015 OSIC adjustment account 16,422,990.59 201,516.47 304014 IPICOL adjustment account - 12,070.71 305012 Insurance Claim Receivable 12,070.71 55,644,113.46 512004 Income Tax ded at source (Refundable) 55,644,113.46 4,388,088.61 512003 Misc. deduction 4,385,088.61 76,668,779.84 TOTAL 76,464,263.37 Schedule -7: Cash & Bank Balance
  64. 64. Previous year Rs. Code No. Particulars Current year Rs. 177,289.10 504021 Cash in hand 297,581.95 3,070,995.50 Cash in Transit 15,784,347.21 5,278,378,198.40 Cash at bank in STD A/C 5,221,730,510.02 396,922,071.12 In Current A/C (Including CLTD A/C with SBI, IDCO Tower BR.) 597,695,347.24 11,326,860.94 In Saving Bank A/C 116,350,493.89 5,689,875,415.0 6 TOTAL 5,951,858,280.3 1
  65. 65. Schedule-8: Advance to Suppliers & Contractors Previous year Rs. Code No. Particulars Current year Rs. 24,412,014.39 514002 Adv. To Suppliers for other purchase 25,078,085.39 514005 125,746,947.33 514004 Advance to Contractors 102,028,574.33 150,158,961.72 TOTAL 127,106,659.72 Schedule -9: MISC. ADV. Recoverable in cash or kind Previous year Rs. Code No. Particulars Current year Rs. 7,230,604.00 508003 Loans to others 7,249,993.00 11,686,529.28 513018 Misc. Advance 12,743,029.28 18,917,133.28 TOTAL 19,993,022.28 Schedule -10: Advance to staff Previous year Rs. Code No. Particulars Current year Rs. 736,363.54 513001 Advance to employees salary 1,609,660.54 1,485,420.76 513003 Adv. To employees travelling 1,464,344.86 817,976.77 513004 Adv. To employees festival 516,576.77 18,267.18 513005 Adv. To employees LTC 13,167.18 1,685,142.17 513006 Adv. To employees Medical 1,307,307.12 2,776,674.24 513009 Adv. To emp. S & M. Cycle 3,017,854.24 1,788,004.61 513008 Adv. To employees Car 2,089,633.61 2,551,239.65 513015 Staff Advance 2,803,593.41 1,737,896.51 513016 Works Advance 1,770,901.01 49,859.05 513002 Adv. To employees Wages 49,859.05 8,961,676.10 513011 House Building Advance 7,528,052.10 4,302.00 513014 Adv. To employees Others 4,302.00 5,226,312.05 513010 Adv. To employees Computer 4,280,385.05 30,683.50 513012 Adv. To employees Cyclone 31,433.50 272,090.00 513013 Spl. HB Advance 273,471.03 1,183,197.00 513007 Deposit of leave salary 1,271,425.00 29,325,105.13 TOTAL 28,031,966.52
  66. 66. Schedule -11: Sundry Adv. Including Other Deposits Previous year Rs. Code No. Particulars Current year Rs. 5,997,016.90 511001 Misc. deposits 5,997,016.90 128,522.00 511004 Dpst. Of Invmnt. Subsidy for outright sale od sheds 128,522.00 21,110,875.14 511002 Security deposit 22,139,815.14 52,680,187.70 511003 EMD 47,600,187.70 512001 Income Tax deducted at source (current Yr.) Adv. Tax paid against fringe-Benefit and 41,501,125.00 514009 Income Tax 326,571,147.0 0 4,615,838.00 512002 ST deducted at sources 4,615,838.00 84,532,439.74 TOTAL 448,553,651.7 4 Schedule -12: RCPT on Capital Account – Infra RCPTS Previous year Rs. Code No. Particulars Current year Rs. 1,540,965.03 30200 7 Deposits from Industrialist 1,540,965.03 9,450,740.64 30101 7 Premium Price for Plots 9,450,740.64 47,373,981.91 30100 4 H.P. Installment receipt (Plot) 48,008,148.02 155,179,630.79 30100 5 H.P Installment receipt (sheds) 166,016,121.85 414,403.00 30100 6 H.P Installment receipt (shops) 789,713.00 269,665,585.09 30100 2 Premium Price for outright sale of sheds 287,071,005.09 14,526,649.29 30101 8 Prem. Price for sheds 14,526,649.29 8,206,960.30 30101 9 Capital Profit on sale of assets 8,235,660.30 2,090,106,721.58 30100 Prem. Price for outright sale of land 2,393,597,410.06
  67. 67. 1 959,518.50 30101 1 Deposit for reservation charges of land 959,518.50 55,718,173.00 30200 1 Dep. For LA Projects-Govt. 61,342,173.00 1,054,608,988.00 30200 6 Dep. For LA Projects (Govt. Land) fr. Industries 1,230,991,398.00 1,515,341.80 30100 3 Prem. Price for outright sale of shops 1,546,326.80 1,748,777,534.00 30200 3 Dep. For LA projects Steel Complex 1,751,183,334.00 12,209,290,496.0 7 30200 2 Capital Receipts – Industrialists (Pvt. Land) 15,556,994,692.07 33,670,368.00 30101 3 EPIP Projects (Receipts-Pvt. Parties) 33,670,368.00 141,344,554.00 30101 0 OR sale of space in Fortune Tower 132,912,425.00 17,842,350,611.0 0 TOTAL 21,698,836,648.6 5
  68. 68. SCHEDULE -13: OTHER LOANS PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 5,000,000.00 205001 OMAD Fund 5,000,000.00 5,000,000.00 TOTAL 5,000,000.00 SCHEDULE -14: GRANT / SUBSIDIES RECEIVED (REVENUE GRANT) PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 15,250,000.00 203012 Govt. of Orissa, Indl. Maint. Grant 15,250,000.00 15,250,000.00 TOTAL 15,250,000.00 SCHEDULE -15: GRANT / SUBSIDIES RECEIVED (CAPITAL GRANT) PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 500,000.00 203007 Govt. of Orissa, Ind. Dept. for W/S works. Govt. of Orissa, Rev. Dept. for Central Tool 500,000.00 606,000.00 203013 Room & training Centre (CTTC) Grants fm Govt. of India under Assistance to States for Developing Export Infrastructure 606,000.00 357,023,000.00 203011 and Allied Activities for involvement of States in Export Effort (ASIDE) – Relating to IDCO only 357,023,000.00 40,000,000.00 203002 Govt. of India subsidy under No Industry Dist (NID) 40,000,000.00 132,800,000.00 203003 Grants fm Govt. of India for Export Promotion Industrial Park (EPIP) 132,800,000.00 207,200,000.00 203004 Subsidy fm Govt. of India for Growth Centre 207,200,000.00 29,868,000.00 203005 Grants fm Govt. of India for Integrated Infrastructure Development Centre (IID) 33,241,000.00
  69. 69. 5,000,000.00 203009 Grants fm Govt. of Orissa for Integrated Infrastructure Development Centre (IID) 5,000,000.00 109,486,000.00 203006 Subsidy fm Govt. of Orissa Growth Centre 109,486,000.00 20,000,000.00 203014 Grants fm GOI, Food Processing, Khurda 20,000,000.00 7,500,000.00 203015 Grants fm Govt. of India fr. EPIP – Circular Infrastructure Balance (CIB) Scheme 7,500,000.00 108,000,000.00 203008 Grants from Govt. (STA, PURI) 110,500,000.00 203010 Central Assistance for Urban Haat Project 4,500,000.00 203017 Subsidy from Govt. of Orissa for ITIR, BBSR 779,580.00 203018 Grant from GOI-MEGA Food Park in Orissa 19,199,000.00 203019 Grant from GOO-External Linkage to SEZ 20,000,000.00 20,000,000.00 203021 Grant from GOO-New les for downstream Industries. 20,000,000.00 1,037,983,000.00 203022 Grant from GOD- Urban Haat Project. 6,287,000.00 1,037,983,000.0 0 TOTAL 1,094,621,580.0 0 SCHEDULE -16: DEPOSITS FROM CLIENTS PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 251,500,000.00 302009 205,400,205.00 4,028,121.00 304024 4,028,121.00 762,541,849.62 303001 to 303004 601,145,324.37 163,454,600.00 302011 242,177,000.00 32,057,616.21 304001 28,110,773.21 88,294,388.74 304003 121,896,159.74
  70. 70. 184,888.13 304005 184,888.13 3,185,050.03 304002 3,097,950.03 1,017,707.23 304004 1,278,208.23 1,241,807.50 301007 1,259,717.50 3,400,000.00 203016 - 33,344,087.73 301009 33,498,018.73 76,400.00 304023 76,400.00 46,309,874.90 301008 32,896,066.90 13,114,011.37 304012 13,039,624.37 23,060,117.00 304021 27,930,219.00 173,234.00 305005 194,043.00 353,000.00 301012 353,000.00 774,062.05 304009 949,577.64 70,445,122.00 302004 105,528,237.00 29,959,680.00 301016 & 302005 20,644,077.00 45,355,303.00 304026 45,635,303.00 2,885,000.00 304018 2,885,000.00 37,687.00 308001 37,687.00 308003 326,182,568.00 208,978.00 308002 208,978.00 1,577,002,585.5 1 TOTAL 1,818,637,146.8 5 SCHEDULE -17: ESTABLISHMENT EXPENSES PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 135,742,279.0 0 701001 Salaries & Allowances 223,031,995.6 0 1,966,725.00 701002 Wages 1,234,252.00 10,420.00 701004 Leave travel concession - 1,915,952.00 701006 Uniform & clothes 4,015,605.00 7,613,915.00 701007 Employers Contribution to PF 16,145,442.00 5,180,000.00 701008 Group gratuity cum LIP 46,065,200.00 621,909.00 701009 Leave Salary & Pension contribn. 663,780.00 2,469,796.00 701010 Reimbursement of conveyance exp. 2,500,774.00 536,832.00 701011 Reimbursement of servant expenses 1,000,629.00 2,521,976.00 701012 Incentive to employees 2,022,197.00 4,642,635.00 701013 Bonus to Employees 4,425,102.00 10,026,691.00 701024 Ex-gratia to Employees 12,930,793.00 516,976.00 702010 House rent 406,791.00 859,176.00 701005(3) Medical expenses 1,319,496.00 5,004,889.00 701019 Employer’s contribution to Pension 5,204,600.00
  71. 71. Fund 594,613.00 701021 Payment on account of VRS - 7,261.00 701022 Contribution of Welfare Fund 48,187.00 471,976.50 701016(5) Admn. & Insp. Ch. On P.F.F.P.F., E.D.L.I 528,084.00 180,704,024.5 0 Total 321,542,927.6 0 SCHEDULE -18: ADMINISTRATIVE EXPENSES PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 3,200.00 701020 Accident death compensation 6,400.00 2,653,008.00 702001 Travelling and conveyance 2,621,668.00 702047 Travelling & conveyance (foreign Tours) 53,857.00 1,996,053.00 702002 Advertisement & publicity 2,986,753.00 2,496,006.55 702003 Printing & stationery 2,006,811.50 1,547,904.81 702004 Telephone & telexe charges 1,664,737.37 456,461.17 702033 Internet & E-mail expenses 276,470.00 438,343.90 702007 Vehicle repairs 392,455.00 4,875,503.60 702006 Vehicle maintenance 4,608,510.65 106,389.00 702008 Vehicle Insurance 207,519.00 10,133,936.00 702038 Municipal fees 3,144,654.00 21,108.00 702011(2) Rent, rates & taxes 124,410.00 457,197.00 702042 Insurances charges 382,853.00 75,167.00 702017 News papers & perdicals 68,137.00 206,445.00 702005 Postage & telegrams 737,522.00 17,601,545.76 702027 Repairs & maintenance of Adm. Bldg. 18,057,934.75 27,987.00 701014 Staff Welfare Expenses 506,429.00 354,603.00 702028 Repairs & maintenance-others 206,084.00 263,454.78 702012 Bank charges 231,719,57 702014 30,761,250.00 702015 Donation & Subscription 30,285,200.00 957,077.00 702019 Legal expenses 443,410.00 4,500.00 702021 Directors sitting fees 4,000.00 101,299.00 702024 Membership fees 52,678.00 3,757,853.00 702025(11) General expenses 6,944,859.00 1,414,315.00 702041 Miscellaneous fees 1,283,098.00 80,627.00 702032 Computerisation charges 1,595,767.00 1,126,492.00 702034 Computer consumables 2,033,870.00 4,579,017.67 702030 Rprs and maint. Of staff quarters 2,929,456.31 51,510.00 702031 Rprs and maint. Of the other assets 41,727.00 13,260.00 706005 Profession Tax paid - 922,036.00 706006 Fringe benefit Tax - 1,786,851.00 702043 Expenditure on Exhibition -
  72. 72. 89,270,401.24 Total 83,898,990.15 SCHEDULE -19: INFRASTRUCTURE MAINT. EXPENSES PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 702037(3) 18,043,278.38 605004 Electricity charges 13,609,229.90 705006 - 12,798,908.00 708004 Water charges 10,017,272.00 37,717.00 702026 Gardening & horticulture 24,551.00 - 704001 Decreetal dues paid 704,507.00 7,483.00 707002 Intt. On delayed payments - 1,667,861.00 703003 R/M-Water supply system in I/Es 127,950.00 48,527,092.50 703002(3) Repairs & maintenance-sheds 69,147,646.00 81,082,339.88 Total 93,631,155.90 SCHEDULE -20: WORKS EXPENSES PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 2,273,586.00 702029 Rprs. & Maint. Of Plant and Machinery 2,071,005.50 51,000,000.00 705014 INFRA GRANT TO JCDL - 7,993,515.00 705004 Design & Consultancy charges 20,799,592.00 39,641.00 705007 Misc. Exp. For works 64,321.00 500.00 705001 Purchase of Tender paper 3,342.00 63,446.00 705003 Storage Incidental charges 22,928.00 28,131.00 705008 Laboratory Expenses 108,906.00 2,295,984.00 702009 Hire Charges Paid 2,694,116.50 3,463.00 705013 OHSDP PACKAGE -5 - 1,825,103.00 703006 R & M of Urban Haat 2,724,129.00 65,523,369.00 Total 28,488,340.00 SCHEDULE -21: INCOME FROM WORKS PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 85,168,006.00 603004 Supervision Charges Realised 104,846,274.00 558,843.00 603001(6) Works Income 301,971.00 102.24 603007 Storage charges realized - 86,500.00 606014 Reg. Fees from Vendors 226,000.00 1,647,174.00 601011 Income from Ekamra Haat 1,716,969.00 12,081,389.00 603002 Contract work Recepts-Const. works 2,495,127.00 99,542,014.24 Total 109,586,341.0 0
  73. 73. SCHEDULE -22: INCOME FROM INDUSTRIAL ESTATES PREVIOUS YEAR RS. CODE NO. PARTICULARS CURRENT YEAR RS. 956,399.00 601001 5,642,049.50 - 601002 - 3,287,162.11 601012 2,528,048.53 - 601003 - 3,822,491.59 601014 7,421,501.50 4,251,162.00 601005 8,423,246.00 17,640,721.95 601008 22,432,289.63 263,209.00 601015 3,194,865.00 34,751,241.22 601010 72,196,798.81 3,042.00 605002 - 12,397,615.00 605003 445,136.00 203,372.00 606001 197,008.00 17,368,269.09 601009 15,468,008.49 13,021,468.54 601013 11,879,890.30 573,837,685.0 0 602001 732,095,022.00 261,581.00 604004 - 10,236,022.00 605006 9,475,782.00 19,217,757.22 601007 21,064,946.79 711,519,198.7 2 Total 912,464,592.5 5
  74. 74. CHAPTER 8 BIBLIOGRAPHY • Audited Annual report of IDCO,Bhubaneswar for the year 2007-08, 2008-09 and 2009-10. • BOOKS- Financial Management-I.M. Pandey Financial Management-P.C. Chandra Financial Management-Sharma Gupta Working Capital Management-H. Bhattacharya • WEBSITES- www.google.com www.idcoindia.com
  75. 75. CHAPTER 7 CONCLUSION IDCO has not only addressed itself to the country’s need for self sufficiency in infrastructure development, but has also given the country the technology edge in producing strategic materials. With its consistent track record in capacity utilization, technology absorption, quality assurance export performance, servicing of loans, internal source generation and posting of profits, IDCO has chartered a course of international confidence. IDCO shows how a well managed company achieves the mission and gives much more profit. Working capital is an important area in a financial management. Just as circulation of blood is essential in human body for maintaining life, no business can run successfully without an adequate amount of working capital. And since IDCO is a infrastructure company, its working capital need is very high. From the study it has been found that IDCO manages its high level of working capital very effectively and efficiently in order to
  76. 76. get better return on investment. IDCO always tries to manage itself properly by utilizing new techniques and policies to avoid problems. CHATER 6 SUGGESTIONS AND RECOMMENDATIONS The following can be recommended for effective management at IDCO: • An understanding among the staff should be installed that working capital management produces profit. • Inventory management is a great concern for IDCO especially stores and spares. Proper steps must be taken for purchase and procurement of inventory. • Short-term credit period availed must be reduced and sundry creditors should be paid faster. • Proper planning of production should be made and communicated to all the concerned departments so as to determine the exact need of materials and prevent unnecessary blockage of useless materials. • Reassess all significant customers periodically. Stop supplying existing customers who are poor payers. After all IDCO is for quality business rather than quantity business. • Plant should be given freedom in deciding the credit policies, cash discount or credit rating.
  77. 77. CHAPTER 1 INTRODUCTION Working capital refers to funds required to be invested in the business for a short period usually upto one year. It is also known as short-term capital or circulating capital. IMPORTANCE OF WORKING CAPITAL 1. Adequate working capital helps in maintaining solvency of the business by providing uninterrupted flow of production. 2. Sufficient working capital enables a business concern to make prompt payments and hence helps in creating and maintaining goodwill. 3. Adequate working capital also enables a concern to avail cash discounts on the purchases and hence it reduces costs. 4. Adequate working capital enables to face business crisis in emergencies such as depression because during such periods, generally, there is much pressure on working capital. 5. Sufficiency of working capital enables a concern to pay quick and regular dividends to its investors as there may not be much pressure to
  78. 78. plough back profits which gains the confidence of its investors and creates a favourable market to raise additional funds in the future. OBJECTIVES OF THE STUDY The main objectives of the study are; 1. To know about the theory and practices of financial management practiced in IDCO. 2. To get an insight of efficient project management which IDCO has achieved and is a rear feet for any private sectors. 3. To study the firms financial position over a period of time. 4. To study the past performance and to estimate its present financial strength. 5. To analyze the financial statement by calculating the financial ratios of IDCO. 6. To get an insight into various sources available for financing the working capital and its utilization. CHAPTER 4 RESEARCH METHEDOLOGY The data for the present study is drawn both from primary and secondary sources. The primary data are collected from the discussions carried out with the accountants and executives of IDCO and few employees. The secondary data are collected from the company’s annual report, newspapers, books etc. The basic understanding of the subject is referred from various professional institutes and the valuable guidance of the guide. Interpretation of various statistics is done through analysis whichever is necessary.
  79. 79. CHAPTER 6 LIMITATIONS OF THE STUDY Any project is not free from limitations. Here also there are several limitations for the study. But the main limitations are ; The study is limited to three years i.e. from 2007-08 to 2009-2010. The data used in the study has been taken from published annual reports only. Hence grouping or sub grouping and analysis of data may slightly affect the result. It is not possible to collect all required primary data from the company’s office.This project has many limitations and there is a scope for improvement.

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