Working capital, also known as net working capital(NWC), is the difference between a company's current assets, such as cash, accounts receivable(customer;s unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as accounts payable.

1. Working Capital Management
(Team D)
MANAGEMENT OF
WORKING CAPITAL

2. Eicher Group (founded by Lal Family) and is a catalyst in the green revolution in India with the
production of India’s first agricultural tractor in 1959. Incorporated in 1982, Eicher Motors is the
flagship company of the Eicher Group in India and a leading player of the Indian automobile
industry. Company has a market capitalization of INR 88,000 Crore.
- Own flagship brand “Royal Enfield” is among the oldest manufacturing models of bikes in the
country in mid‐size category.
- Commercial vehicles in collaboration with Volvo.
- Personal utility vehicles through the recent collaboration with Polaris.
- Introduction of a new product line of electric motorcycles.
- Capacity enhancement
- Expanding market base to international markets for its existing and new proposed product.
About the company
Expansion plans
Existing Products

3. 
2019
Preparing for future growth
Capacity
Product
Development
Vallam Vadagal would start its productionin August 2017
Total capacity available in FY 17-18 will be 8,25,000
Peak capacity to ramp up to 9,00,000 by FY2018-19
2 Technologycentresin ChennaiandUK
1 newproductplatformindevelopmentstagein250cc-750cc
range, likely to roll out by the end of FY2017-18
Distribution
Capital expenditure planned for FY17-18 ~ INR 1,100 Crore for Capacity Expansion, Technology Centre,
Infrastructure, Product Development and expanding distribution network
NewexclusivestoresformatintroducedinIndia&International
Market
No. of dealers in India to increase to 825 by March ‘18
From Investor Presentation

4. 
Opportunity – International Business
The Oddity of the Motorcycle Industry Globally.., is an opportunity
Mid
>750cc
Leisure
Motorcycles
SegmentCAGR: 7%
Period:2012-16
250-750cc Royal Enfield's ambition is to
lead and grow the under-served
global mid-sized motorcycle
segment (250-750cc)
Mature
Markets
<250cc
INVESTORPRESENTATION
MAY2017
Most Industries Motorcycles
Industry
250-750cc
Developing
Markets
>750cc
SegmentCAGR: -2%
Period:2012-16
<250cc
Mass Commuter
Motorcycles
Premium
Motorcycle Industry
Mass
18
Premiu
mMid
From Investor Presentation

5. Parameters Explanation
Debtor Management Very high debtor turnover ratio indicates that debtors
are quickly realised and leads to efficient utilization of
funds
Inventory turnover Fast moving goods backed by strong sales and
increasing inventory turnover ratio
Assets turnover ratio High ratio suggests that assets are being utilized
efficiently to generate revenues
Credit Management Usage of short term trade credits mainly
supplier/vendor credits
Objective of Working capital is to maintain efficient and timely production cycle
and effective management of inventory.
Company follows aggressive working capital policy through which it try to squeeze
by with a minimal investment in current assets coupled with an extensive use of
short-term trade credit.

6. Per Share Ratios Mar-17 Mar-16 Dec-14 Dec-13
Basic EPS 573.75 453.2 206.38 103.15
Book Value 1,441.60 791.89 455.23 303.75
PBDIT Margin (%) 34.57 30.84 28.03 23.13
PBIT Margin (%) 32.39 28.61 26.38 21.34
PBT Margin (%) 32.35 28.59 26.32 21.33
Net Profit Margin (%) 22.16 19.87 18.43 16.36
Return on Networth / Equity (%) 39.77 57.18 45.3 33.92
Return on Capital Employed (%) 38.34 55.35 43.93 32.84
Return on Assets (%) 28.25 35.98 25.07 18.78
Total Debt/Equity (X) 0 0.01 0 0
Asset Turnover Ratio (%) 127.45 181.04 135.99 114.78
Current Ratio (X) 0.94 0.98 1.31 1.65
Quick Ratio (X) 0.71 0.73 1.09 1.43
Inventory Turnover Ratio (X) 21.83 20.6 14.78 11.84
Debtors Turnover ratio 147.42 216.90 264.10 184.99
Working Capital Turnover ratio -75.11 -285.86 10.25 4.09
Working Capital of Company -93.30 -21.56 293.99 414.31
Current Assets 1,360.36 1,174.81 1,250.81 1,049.26
Current Liabilities 1,453.66 1,196.37 956.82 634.95
Net Working Capital -93.30 -21.56 293.99 414.31
Eicher Motors
Profitability Ratios
Liquidity Ratios

7. -
0.50
1.00
1.50
2.00
2017 2016 2015 2014
Current Ratio
Eicher Motors TATA Motors Ashok Leyland M&M
-
0.50
1.00
1.50
2.00
2017 2016 2015 2014
Quick Ratio
Eicher Motors TATA Motors Ashok Leyland M&M

8. -
10.00
20.00
30.00
Eicher Motors TATA Motors Ashok Leyland M&M
Inventory Turnover Ratio
Inventory turnover Ratio 2017 Inventory turnover Ratio 2016
Inventory turnover Ratio 2015 Inventory turnover Ratio 2014
-
100.00
200.00
300.00
2017 2016 2015 2014
Debtors turnover Ratio
Eicher Motors TATA Motors Ashok Leyland M&M

9. Projected Working Capital Requirement March'20 March'19 March'18
Current Investments 800.00 100.00 100.00
Inventories 1,359.51 1,071.18 821.18
Trade Receivables 1,393.57 1,211.80 1,053.74
Cash and Cash Equivalents 29.55 29.78 42.61
Short Term Loans And Advances 10.00 20.00 10.00
Other Current Assets 110.00 100.00 90.00
3,702.64 2,532.76 2,117.53
Less: Current Liabilities
Trade Payables 1,028.00 894.00 812.00
Other Current Liabilities 157.00 138.00 122.00
Short Term Provisions 80.00 70.00 60.00
1,265.00 1,102.00 994.00
Projected Net Working Capital Requirement 2,437.64 1,430.76 1,123.53
Less: Own Funding 2437.64 630.76 323.53
Short term borrowings 0.00 800.00 800.00

10. -200.00
0.00
200.00
400.00
600.00
800.00
1,000.00
1,200.00
1,400.00
1,600.00
Mar-17 Mar-16 Mar-15 Mar-14 Mar-13
Chart Title
Current Assets Current Liabilities Net Working Capital

11. Options Description Cost of borrowings Availed/Not availed
Working Capital Loan
Short term borrowings from banks.
Disbursement upto sanctioned amount
11.50% Availed
Cash Credit/Overdraft
Short-term lending power from banks
capped at limit for withdrawals in excess of
bank balance
10% Availed
Forfaiting
Selling of medium term export receivables
to third parties (bank/ financial
institutions). Non recourse financing
option
1.5%+ LIBOR Availed
Packing Credit
Loan for procurement of materials before
shipment against confirmed sales order
from customer
2%+ LIBOR Availed
Factoring
Selling of receivables to third party
(Available for domestic customers)
4% per month Not availed
Commercial Papers
Unsecured long term promissory note. Can
be used to meet short term working capital
requirements
7% Not availed
Asset Refinancing
Amount borrowed depends on the value of
the items used to secure funding
Not assessed Not availed

12. Factors that affected our working capital requirements:
Factors Impact on Working Capital
1. Industry practice of cash basis sales to
dealers/ distributors
Reduction in WC due to fast liquidity
of the receivables
2. Strong supply chain management
system
Reduction in WC due to reduction in
the inventory holding period
3. Introduction of the new product Line-
Liberal Credit policy of company
Company’s strategy for market
penetration will require the company
to have liberal credit policy increasing
the WC
4. Introduction of the new product Line-
Higher cash flow requirements
Company will require extra funds to
finance its procurements from new
vendors

13. Strategies going forward….
Working Capital Strategy to manage WC
1. Supplier Management
1. Developing specific suppliers to ensure the
material availability as and when needed
2. Long term contracts with suppliers and
negotiating the credit terms
2. Inventory Management
1. Strong market analysis and forecasting to procure
inventory on JIT basis.
2. Efficient logistics to minimize the inventory
holding period
3. Debtors / Credit Management
1. Plan to migrate the new dealers/ distributors to
existing model of cash sales
2. Offering cash discounts / schemes to speed up
collections
4. Cash and fund management 1. Reduction in the number of payment cycles from
weekly to fortnightly basis.