Aurobindo Pharma's working capital management was analyzed over 3 years. Key metrics like current ratio, quick ratio, and cash ratio fluctuated between 1.3-1.35, 0.75-0.8, and 0.03-0.08 respectively, indicating adequate short-term financial health. Return on capital employed declined from 0.371 to 0.319, while debt-equity ratio improved from 0.398 to 0.157. Recommendations included raising short-term funds and increasing current assets to maintain liquidity. Overall performance was assessed as unsatisfactory due to insufficient liquidity.

1. A
Presentation on
Working capital management at
“Aurobindo Pharma.Ltd”
By
Nikhil Gupta

2. WORKING CAPITAL
The capital of a business which is used in its day-to-day trading operations is called as
working capital.
Working capital management
Working capital management refers to a company's managerial accounting strategy
designed to monitor and utilize the two components of working capital, current
assets and current liabilities, to ensure the most financially efficient operation of the
company.
CONCEPTS OF WORKING CAPITAL
There are two concepts of working capital
• Gross working capital
• Net working capital

3. About the company
• Aurobindo Pharma was founded in 1986 by Mr P. V. Ramaprasad Reddy and Mr K.
Nityananda Reddy .It started its operation with a single unit manufacturing semi
synthetic penicillin (SSPs) at Pondicherry.
• It has a product presence in key therapeutic segments like SSPs, cephalosporin,
antivirals, CNS, cardio-vascular, gastroenterology, etc. The company is the market leader
in semi-synthetic penicillin drugs.
• It has set up overseas branches/ representative offices located in Ethiopia, Tanzania,
Kenya, Uganda, Italy, Ghana, Vietnam, and United Kingdom.
• Aurobindo Pharma has identified international operations, catering to over 100 countries.
• The revenue of Aurobindo Pharma.Ltd is Rs. 9,491.09 crores.
Awards
In 2011 Aurobindo Pharma received Platinum Certificate of Outstanding Exports Award
from Pharmexcil.

4. CURRENT RATIO
Indicator of a firm's ability to meet short-term financial obligations, it is the ratio of current
assets to current liabilities.
Formula: Current assets ÷ Current liabilities
Year Current assets
(in Cr.)
Current liabilities
(in Cr.)
Current ratio
2016 10001.47 7475.88 1.337
2015 8298.80 6136.40 1.352
2014 5631.18 4220.04 1.334
1.337
1.352
1.334
1.325
1.33
1.335
1.34
1.345
1.35
1.355
2016 2015 2014
Current ratio
Current ratio

5. QUICK RATIO
Quick ratio (also known as “acid test ratio” and “liquid ratio”) is used to test the ability of a
business to pay its short-term debts.
Formula:
The formula for the calculation of quick ratio is given below:
Formula : Quick Ratio = Quick Assets ÷ Quick Liabilities
Year Quick Assets (in
Cr.)
Quick Liabilities (in
Cr.)
Quick Ratio
2014 3263.64 4220.04 0.773
2015 4687.5 6136.40 0.763
2016 5913.37 7475.88 0.791
0.791
0.763
0.773
0.745
0.75
0.755
0.76
0.765
0.77
0.775
0.78
0.785
0.79
0.795
2016 2015 2014
Quick Ratio
Quick Ratio

6. PROPRIETARY RATIO
Proprietary ratio (also known as Equity Ratio or Net worth to total assets or shareholder
equity to total equity).
Formula:
Proprietary ratio = Proprietor's funds / Total assets
PARTICULARS 2016 (in Cr.) 2015 (in Cr.) 2014 (in Cr.)
Share Holders Funds 7,056.73 5,155.91 3,750.15
Total Assets 15,699.35 12,914.48 9,489.82
Proprietary Ratio
(times)
0.449 0.399 0.395
0.449
0.399
0.395
0.36
0.37
0.38
0.39
0.4
0.41
0.42
0.43
0.44
0.45
0.46
2016 2015 2014
Proprietary Ratio (times)
Proprietary Ratio (times)

7. DEBT EQUITY RATIO
Debt/Equity Ratio is a debt ratio used to measure a company's financial leverage, calculated
by dividing a company’s total liabilities by its stockholders' equity.
FORMULA:-Total long term liabilities ÷ Share Holders funds
Year Total long term liabilities
(in Cr.)
Share Holders funds
(in Cr.)
Debt equity ratio
2016 1,107.19 7,056.73 0.157
2015 1,596.35 5,155.91 0.309
2014 1,493.96 3,750.15 0.398
0.157
0.309
0.398
0
0.05
0.1
0.15
0.2
0.25
0.3
0.35
0.4
0.45
2016 2015 2014
Debt equity ratio
Debt equity ratio

8. CASH TO CURRENT ASSETS RATIO
The Cash to Current Assets ratio measures a company’s liquidity, basing how liquid a
company is by its Cash and Cash Equivalents
Formula: Cash to Current Assets ratio = Cash ÷ Current Assets
Year Cash
(In Cr.)
Current assets
(In Cr.)
Cash to current
assets ratio
2016 834.39 10001.47 0.083
2015 469.11 8298.80 0.056
2014 178.58 5631.18 0.031
0.083
0.056
0.031
0
0.01
0.02
0.03
0.04
0.05
0.06
0.07
0.08
0.09
2016 2015 2014
Cash to current assets ratio
Cash to current assets ratio

9. RETURN ON CAPITAL EMPLOYED
Return on capital employed or ROCE is a profitability ratio that measures how efficiently a company
can generate profits from its capital employed by comparing net operating profit to capital employed.
In other words, return on capital employed shows investors how many dollars in profits each dollar of
capital employed generates.
Formula: ROCE = Earnings before Interest and Tax (EBIT) / Capital Employed
YEAR EBIT
(In Cr.)
CAPITAL
EMPLOYED
(In Cr.)
RETURN ON
CAPITAL
EMPLOYED RATIO
2016 2,632.36 8233.47 0.319
2015 2,317.64 6778.08 0.342
2014 1,994.27 5269.78 0.371
0.319
0.342
0.371
0.29
0.3
0.31
0.32
0.33
0.34
0.35
0.36
0.37
0.38
2016 2015 2014
ROCE Ratio
ROCE Ratio

10. FIXED ASSETS TO EQUITY RATIO
It Measures the contribution of stockholders and the contribution of debt sources in the
fixed assets of the company. It is computed by dividing the fixed assets by the stockholders’
equity.
Formula: Fixed Assets To Equity Ratio = Fixed Assets ÷ Stockholder’s Equity
Year Fixed assets
(In Cr.)
Equity
(In Cr.)
Fixed assets to
equity ratio(times)
2016 5,697.88 58.52 97.367
2015 4,615.68 29.20 158.071
2014 3,858.64 29.15 132.371
97.367
158.071
132.371
0
20
40
60
80
100
120
140
160
180
2016 2015 2014
Fixed assets to equity ratio
Fixed
assets to
equity
ratio

11. SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2013-14
PARTICULARS 2013
(in crores)
2014
(in crores)
EFFECT OF CHANGES
IN WORKING CAPITAL
INCREASE
(in crores)
DECREASE
(in crores)
CURRENT ASSETS:
Cash and Bank balance 208.45 178.58 - 29.87
Trade Receivables 1,596.98 2636.57 1039.59 -
Inventories 1,923.59 2367.54 443.95 -
Other Current Assets 75.61 71.27 - 4.34
Short Term Loans and
Advances
332.08 377.19 45.11 -
A.TOTAL CA 4136.71 5631.15 1494.44 -
CURRENT LIABILITIES:
Short Term Provisions 80.09 126.60 - 46.51
Other Current Liabilities 150.87 387.68 - 236.81
Trade Payables 968.74 1,351.20 - 382.46
B.TOTAL CL 1199.7 1865.48 - 665.78
W.C (A – B ) 2937.01 3765.67 828.66
NET INCREASE IN WC 828.66

12. SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2014-15
PARTICULARS 2013
(in crores)
2014
(in crores)
EFFECT OF CHANGES
IN WORKING CAPITAL
INCREASE
(in crores)
DECREASE
(in crores)
CURRENT ASSETS:
Cash and Bank balance 178.58 469.11 290.53
-
Trade Receivables 2636.57 3539.17 902.6
- -
Inventories 2367.54 3611.30 1243.76
--
Other Current Assets 71.27 91.15 19.88
-
Short Term Loans and Advances 377.19 568.42 191.23
--
A.TOTAL CA 5631.15 8279.15 2648
-
CURRENT LIABILITIES:
Short Term Provisions 126.60 218.24
-
91.64
Other Current Liabilities 387.68 1,364.96
-
977.28
Trade Payables 1,351.20 2,051.12
-
699.92
B.TOTAL CL 1865.48 3634.32 1768.84
W.C (A – B ) 3765.67 4644.83 879.16
NET INCREASE IN WC 879.16

13. SCHEDULE OF CHANGES IN WORKING CAPITAL FOR THE YEAR 2015-16
PARTICULARS 2013
(in crores)
2014
(in crores)
EFFECT OF CHANGES
IN WORKING CAPITAL
INCREASE
(in crores)
DECREASE
(in crores)
CURRENT ASSETS:
Cash and Bank balance 469.11 834.39 365.28
-
Trade Receivables 3539.17 4,171.92 632.75
-
Inventories 3611.30 4,088.10 476.8
-
Other Current Assets 91.15 261.66 170.51
-
Short Term Loans and Advances 568.42 645.38 76.96
-
A.TOTAL CA 8279.15 10001.42 1722.27
-
CURRENT LIABILITIES:
Short Term Provisions 218.24 182.72 35.52
-
Other Current Liabilities 1,364.96 1,537.37
-
172.41
Trade Payables 2,051.12 2,526.77
-
475.65
B.TOTAL CL 3634.32 4246.86
-
612.54
W.C (A – B ) 4644.83 5754.56
-
1109.73
NET INCREASE IN WC 1109.73

14. SUGGESTIONS AND RECOMMENDATIONS
• Company should raise funds through short term sources for short term requirements of
the funds, which comparatively economical as compared to long term funds.
• Company should increase the level of current assets so as to maintain the liquidity of
the company.
• Recommendation can be used by the firm for the betterment of the firm after the
detailed study and analysis of project report on study and analysis of working capital.
• Over all the performance of the company is not very satisfactory because it doesn’t
have a good liquidity position and it should generate sufficient funds to pay off the
short term liabilities.