Aadriti b.com project report

RESEARCH PROJECT REPORT
(BCOM (H)-1604)
On
“A DESCRIPTIVE STUDY ON WORKING
CAPITAL MANAGEMENT OF HINDALCO
INDUSTRY LIMITED, RENUKOOT”
Towards partial fulfillment of
Bachelor of Commerce (Honors)
(BBD University, Lucknow)
Guided By: Submitted by:
Dr. Ruchi Khanna Aadriti
Roll No. 1160678001
Session 2019-2020
School of Management
Babu Banarasi Das University
Sector I, Dr. Akhilesh Das Nagar, Faizabad Road, Lucknow (U.P.) India

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DECLARATION
I hereby declare that project report titled “A DESCRIPTIVE STUDY OF
WORKING CAPITAL MNAGEMENT OF HINDALCO INDUSTRIES
LIMITED” submitted by me to BBD UNIVERSITY in partial fulfilment of the
award of degree of Bachelor of Commerce (Hons.). It is a record of bonfires project
work carried by me under the guidance of Dr. Ruchi Khanna. I further declare that
the work reported in this project has not been submitted and will not be submitted,
either in part or full, for this the award of any other degree in the institution.
AADRITI
B.COM (H) 31 R.NO. 1170678001

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ACKNOWLEDGEMENT
In order to accomplish a task, facts, situations and persons integrate together to form a
background. “Greatness lies in being grateful and not in being great.” This
research report is a result of contribution of distinct personalities whose guidance here
made my effort a producing one, as “no task is a single man’s effort”.
I would like to express my deep sense of gratitude to the respectable guide
distinguished personalities for their precious suggestions and encouragement during
the project. The experience which is gained by me during this project is essential for me at
this turning point of my career. I am thankful to my project guide Dr. Ruchi Khanna
for kind support and supervision under whose kind & constant guidance I had the
opportunity to expand my horizons and view the various problems from different
prospective. I am also thanking her for sparing her valuable time to listen my problems
and difficulties faced by me during the completion of this project report.
AADRITI
B.COM (H) 31

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PREFACE
It was a privilege for me to work in a reputed organization Hindalco Industries.
This has given us an opportunity to work in a truly professional environment where
team work score over individual effort, where there is a helpful atmosphere. A well
planned, properly executed and evaluated training helps a lot in inoculating good
work culture. The project on “A descriptive study on Working Capital
Management of Hindalco Industry Limited, Renukoot” has been made to facilitate
effective understanding about the various aspects.
The project training has provided me an opportunity to gain practical experience,
which has helped me to increase my sphere of knowledge to a greater extent. I have
tried to summarize all our experience and knowledge acquired up till now, in this
report. This project is a keen effort to obtain the expected results and fulfill all the
information required.

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EXECUTIVE SUMMARY
The project is based on the study of WORKING CAPITAL MANAGEMENT of
Hindalco Industries Limited. A detailed view of the project will enlighten what
subject the project is dealing with, what is the aim of the project, what is its purpose
and scope, the various methods used for collecting the data and their various sources,
including the literature survey and numerical survey, further the limitations of the
project is specified.
The Working Capital Management is the management of the current assets of a firm.
A firm’s Working Capital consist of its investment in current assets, which includes
short term assets- cash and bank balance, inventories, sundry expenses etc.
This project tries to evaluate how the working capital is managed in hindalco
industries the critical analysis of last five years status through research methodology
of trend and ratio analysis.

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TABLE OF CONTENT
S. NO. DESCRIPTION
Certificate ii
Declaration iii
Acknowledgement iv
Preface v
Executive Summary vi
1. Introduction to the Topic
2. Literature Review
3. Company Profile
4. Objectives of the study
5. ResearchMethodology
6. Limitations of the study
7. Data Analysis & Interpretation
8. Findings
9. Suggestion
10. Conclusion
11. Bibliography

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INTRODUCTION
Working capital:
“Working capital is the amount of the funds necessary to cover the cost of operating
the enterprise”. Basically working capitals refers to the cash a business requires for
day to day operations or basically for the conversion of raw material into finished
goods. Working capital is commonly defined as the difference b/w the current assets
and the liabilities. Efficient working capital management requires that firm should
operate with some amount of working capital, the exact amount varying from firm to
firm and depending, among other things on nature of industry.
“Working capital is the amount of the fund necessary to cover the cost of operating
the enterprise. Working capital is commonly defined as difference b/w current assets
and current liabilities. Efficient working capital management requires that firm
should operate with some amount of working capital, the exact amount varying from
firm to firm and depending, and other things on the nature of industry.
Types of working capital:
Gross working capital:
Gross working capital refers to the firm’s investment in the current assets. Current
assets are assets, which can be converted into cash within the accounting year. The
main components of the current assets are cash, debtors, marketing securities and
stock.
Gross working capital = total current assets

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Net working capital:
Net working capital is the excess of current assets over the current liabilities
i.e.
Net working capital = current assets – current liabilities
Net working capital may be positive or negative. When the current assets exceed the
current liabilities the working capital is positive and the negative working capital
results when the current liabilities exceed the current assets.
Permanent working capital:
Permanent or fixed working capital is the minimum amount, which is required to
ensure effective utilization of fixed facilities and for maintaining the circulation of
current assets. There is always minimum level of current assets, which is continuously
required by the enterprise to carry out its normal business operation.
The permanent working capital can be further classified as:-
Regular Working Capital:- This is the amount of working capital required for
the continuous operations of the enterprise. It refers to excess assets over current
liabilities. Any organization has to maintain a minimum stock of materials, finished
goods and cash to ensure its smooth working and to meet its immediate obligations.
Reserve Working Capital:-Reserve working capital is the excess amount over
the requirement for regular working capital which may be provided for contingencies
that may arise at unstated period such as strikes, rise in prices, depression etc.

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CharacteristicsofPermanent Working Capital:-
 Amount of permanent working capital remains in the business in one form or the
other. The suppliers of such WC should not accept its return during the lifetime of
the firm.
 It grows with the size of the firm.
 Permanent WC is permanently needed for the business.
Temporary or variable working capital:
Temporary or variable working capital is the amount of working capital, which is
required to meet the seasonal demand and same special exigencies. Variable working
capital can be further classifieds as seasonal working capital and special working
capital. The temporary working capital can be further classified as:
 Seasonal Working Capital:- Seasonal working capital is required to meet
the seasonal needs of the enterprise such as, a textile dealer would require large
amount of funds a few months before Diwali.
 Special Working Capital:- Special working capital is that part of working
capital, which is required to meet special agencies such as launching of extensive
marketing campaign for conducting research etc. Most of the enterprises have to
provide additional working capital to meet the seasonal and special needs.

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Temporary working capital differs from permanent working capital in the sense that it
is required for short periods and can’t be permanently employed gainfully in the
business.
Permanent WC & Temporary WC of Stable Firm
Time Figure 1
Permanent WC & Temporary WC of a stable firm
Time Figure 2
Temporary
Permanent
A
M
O
U
N
T
O
F
W
C
Temporary
Permanent
A
M
O
U
N
T
O
F
W
C

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It is shown in the above diagram that permanent WC is stable while temporary WC is
fluctuating, increasing and decreasing in accordance with the seasonal demands. In
the case of an expanding firm the permanent working capital WC line may not be
horizontal. This is because the demand for permanent CA might be increase in or
decreasing to support arising level of activities. In that case line should be raising one
as follows: Both kind of WC are necessary to facilitate the sales process through the
operating cycle. Temporary working capital is created to meet liquidity requirements
that are purely transient nature.

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Sources OfWorking Capital
The financial manager is always interested in obtaining the working capital at the
right time, at a reasonable cost and at best possible favorable terms. The following is a
snapshot of various sources of working capital:
Sources of working capital are divided into two types:-
1. Long-term
2. Short-term
Sources of long term working capital:-
 Issues of the shares
 Floating of debentures
 Ploughing back of the profit
 Loans
 Public deposits
Sources of short term working capital are :
Internal sources:
 Depreciation
 Taxation
 Accrued expenses
External sources:
 Trade credit
 Credit papers

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 Bank credit
 Customer’s credit
 Govt. Assistances
 Loans from directors
 Security from employees
Working capital cycle:
The speed with which the working cycle completes one cycle determines the
requirement of working capital. Longer the cycle larger is the requirement of working
capital. In a manufacturing concern, the working capital cycle starts with the purchase
of raw material and ends with realization of cash from the sales of finished products.
This cycle involves purchase of raw material and stores, it’s in to stock of finished
goods through work-in-progress with progressive increment of labor and service cost,
conversion of finished stock into sales, debtor’s receivables and ultimately realization
of cash and this cycle continues again from cash to purchase of raw material and so
on. The operating cycle can be said to be at the heart of the need for WC. The
continuing flow from cash to suppliers, to inventory, to account receivables and back
into cash is known as operating cycle.
The operating cycle of a manufacturing Company involves three
phases:
 Acquisition of resources- Such as raw materials, labor, power and fuel etc.
 Manufacturing of product–This includes conversion of raw material into
WIP into finished goods.

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 Sale of the product– Either on cash or on credit. Credit sales create account
receivables for collection.
This phase affects cash flows, which most of the time are neither synchronized nor
certain. They are not synchronized because cash out flows usually occurs before cash
inflows.
DEBTORS
FINISHED GOODS
RAW MATERIAL
CASH
WORK IN PROGRESS

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Working capital cycle indicates the length of time between a company’s paying for
materials, entering into stock and receiving the cash from sales of finished goods. It
can be determined by adding the number of days required for each stage in the cycle.
The determination of working capital cycle helps in the forecast, control and
management of working capital. The duration of working capital cycle may vary
depending on the nature of the business.
The operating cycle (working capital)consists of the following events,
which continues throughout the life of business
 Conversion of cash into raw materials;
 Conversion of raw-materials into work-in-progress;
 Conversion of work-in-progress into finished stock;
 Conversion of account receivables into cash; and
 Conversion of finished stock into account receivables through sales.
Factors Determining The Working Capital Requirement
A firm should plan its operations in such a way that it should have neither too much
for too little working capital. The total working capital requirement is determined by a
wide variety of factors. These factors affects different enterprise differently. They also
vary from time to time. The following is the description of factors, which generally
influence the working capital requirement of a firm:-
 Nature of business
 Production policy

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 Length of production cycle
 Rate of stock turnover
 Credit policy
 Rate of growth & expansion of business
 Seasonal variation
 Business fluctuation
 Earning capacity and dividend policy
 Profit level changes
 Availability of raw material
 Magnitude of profit
 Operating efficiency
Estimating working capital requirement
There are no set rules or formula to determine the working capital requirement of the
firm. The quantum of working capital requirement of a firm largely depends upon
aforesaid factors. A finance manager in order to estimate the working capital
requirement of the firm has to keep in mind the above factors.
Besides he/she canapply any of the following techniques for assessing
working capital requirement:-
1) Estimation of components of working capital
2) Percentage of sales method
3) Operating cycle approach

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1. Estimation of components of working capital
Since working capital is the excess of current assets over current liabilities, estimating
amount of different constituents of working capital can make an assessment of the
working capital requirement. For example inventories, account receivables, cash,
account payable etc.
Inventories- the term inventories include stock of raw material, work in progress
and finished goods. The estimation of each of these is as follows-
(a) Stock of raw material: The average amount of raw material to be kept in
stock will depend upon the quality of raw material required for production.
 During a particular period and average time taken in obtaining a fresh delivery
suitable.
 Adjustments may have to make to provide for in contingency and seasonal factor
It can be calculated by following formula:-
Budget production * Cost of RM * Average inventory holding period
(Units) (Per unit) (Month or days) 12 or 365
(b) Work in progress: The cost of work in progress includes raw materials,
wages and other overheads. In determining the amount of work in progress the time
period for which goods will be in process is most important. Work in progress is
normally equivalent is 50% of total cost of production.

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Symbolically-
Budget production * Estimated WIP * Average WIP time span
(c) Finished Goods: The period for which finished goods have to remain in the
warehouse before sales is an important factor for determining the amount locked up in
the finished goods. It is summed up as:-
Budget production * Cost of goods produced * FG holding period
(2) Sundry Debtors: The amount of funds locked up in sundry debtors will be
computed on the basic of credit sales and time lag in collecting payment. It should be
estimated in relation to total cost price as follows:-
Budgeted credit sales * Cost of Sales * Avg. Debt collection period
(3) Cash and Bank Balance: The amount of money to be kept as cash in hand
or cash at bank can be estimated on the basis of past experience.

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(4) Sundry creditors: The lag in payment to suppliers of raw material, goods etc.
And the likely credit purchase made during the period to help in estimating the
amount of creditors-
 Budget production
 Raw material
 Credit period allowed by creditors
 (Units requirement (Month or days) 12 or 365
(5) Outstanding Expenses: The time lag in payment of wages and other
expenses will help In estimating amount of estimating amount of outstanding
expenses as follows:-
Budget production * Labour and OE cost * time lag in payment of exp.
2. Percentage of Sales Method
This is a traditional and simple method of estimating working capital requirement
.According to this method, on the basis of past experience between sales and working
capital requirement, a ratio can be determined for estimating the working capital
requirement in future. For example if the past experience show that working capital
has been 30% of sales and it is estimated that sales for the next year would amount to
Rs.1,00,000.00, the amount of working capital requirement can be access to Rs.

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30,000.00. The basic criticism of this method is that it presumes a linear relationship
between sales and working capital. This is neither true in all cases nor the method is
therefore, universally accepted.
3. Operating cycle approach
According to this approach working capital requirement depends on the operating
cycle of the business. The operating cycle begins with acquisition of raw material and
ends with the collection of receivables. It may be broadly classified into the following
four stages viz:
 Raw material and stores storage stage
 Work in progress stage
 Finished goods inventory stage
 Receivables collection stage
The duration of operating cycles for the purpose of estimating working capital
requirement is equivalent to the sum of the duration of each of these stages less credit
period allowed by the supplier of the firm.
Symbolically:
O=R+W+F+D-C
Where
O = Duration of operating cycles
R = Raw Material and stores storage period
W = Work in progress period
F = Finished goods storage period

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D = Debt collection period
C = Creditors payment period
The above can be calculated as follows:-
Average stock of raw materials and stores * 365
R=
Average raw materials and stores consumption
Average working progress inventory * 365
W=
Average cost of production
Average finished goods inventory * 365
F=
Average cost of goods sold
Average book debts * 365
D=
Average credit sales
Average trade creditors * 365
C=
Average Credit purchase

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After completing the period of operating cycle total number of operating cycle
That can be completed during a year can be computed by dividing 365 days with
The number of operating days in a cycle.
Symbolically-
N = 365/ O
Where, N = Number of operating cycles
O = Duration of operating cycles
The total operating expenditure in the year when divided by the number of operating
cycles in a year will be the average amount of the working capital requirement.
Total operating expenditure
WCR =
Number of operating cycles in a year
Importance of working capital:
1. Provide ability to face emergencies in business crisis.
2. Provide high and good credit from banks.
3. Helpful for creating and maintaining goodwill.
4. Increase the working efficiency.

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Importance of working capital in parag:
Working capital is needed for following purposes:
 For the purpose of raw material (milk), components and spares (related to plant).
 Timely payment of milk, to milk producers in flush season (Nov-Feb).
 Maintenance of the machinery.
 For meeting day to day expenses.
 Timely payment of the salaries to the employee.
Need And Objective For Working Capital:
Working capital is the life blood of a business. ‘Working capital’ is very essential to
maintain the smooth running of a business. Business cannot run successfully without
an adequate amount of working capital. Every business needs some amount of
working capital. The needs for working capital, arises due to time gap between
production and realization of cash. There are time gaps in purchase of raw material
and production and sales, and realization of cash.
Thus, working capital is needed for the following purposes:-
 For the purchase of raw material, component and spares.
 To pays the wages and salaries.
 To incur day- to- day expenses and overhead costs such as fuel, power and office
expenses etc.
 To meet the selling costs such as packing advertising etc.

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 To provide credit facilities to the customers.
 Vi. To maintain the inventories of raw material, work in progress, store, spares,
and finished stock.
For studying the working need of working capital in a business, one has to studying
the business under varying circumstances such as new concern, as a growing and one,
which has attained maturity. A new concern requires a lot of funds to meets its initial
requirement such as promotion and formation etc. These expenses are called
preliminary expenses and capitalized. The amount needed for working capital
depends upon the size of the company and the ambition of it promoters. Greater the
size of business unit, greater will be the requirement of working capital. The
requirement of the working capital goes on increasing with the growth and expansion
of the business until its gain maturity. At maturity, the amount of working capital
required is called normal working capital.
Importance of adequate working capital
Working capital is the lifeblood of a business.’ Working capital’ is very essential to
maintain the smooth running of business. Business can run successfully without an
adequate amount of working capital.
The main advantages of maintaining adequate amount of working
capital are:
 Adequate working capital helps in maintaining solvency of the business by
providing uninterrupted flows of production.

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 Sufficient working capital enables a business concern to make prompt payments
and hence helps in creating and maintaining good will.
 Adequate working capital, high solvency can arrange loans from banks.
 Sufficient working capital ensures regular supply of raw material and
continuous production.
 A company which has ample working capital can make regular payment of
salaries, wages and other day- to- day commitments which raises the morale of
its employees.
 Adequate working capital enables a concern to face business crisis in
emergencies.
 Adequacy of working capital creates an environment of security, confidence,
and high morale and creates overall efficiency in a business.
The dangers of excessive working capitalare as follows:
 It results in unnecessary accumulation of inventories. Thus chances of inventory
mishandling, waste, theft and losses increases.
 It is an indication of defective credit policy and slack collection period.
Consequently, higher incidence of bad debts results, which adversely affects
profits.
 Excessive working capital makes management complacent, which degenerates
into managerial inefficiency.
 Tendencies of accumulating inventories tend to make speculative profits grow.
This may tend to make dividend policy liberal and difficult to cope with in future
when the firm is unable to make speculative profits.

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Inadequate working capital is also the bad and has the following
dangers:
 It stagnates growth. It becomes difficult for the firm to undertake profitable
projects for non-availability of working capital funds.
 It becomes difficult to implement operating plans and achieve the firm’s profit
target.
 Operating inefficiencies creep in when it becomes difficult even to meet day- to-
day commitments.
 Fixed are not efficiently utilized for the lack of working capital funds. Thus the
firm’s profitability would deteriorate.
 Paucity of working capital funds render the firm unable to avail attractive credit
opportunities etc.
 The firm loses its reputation when it is not in a position to honor its short-term
obligations. As a result the firm faces tight credit terms.
An enlightened management should, therefore, maintain the right amount of working
capital on the continuous basis. Only then a proper functioning of business operations
will be ensured. Sound financial and statistical techniques, supported by judgment,
should be used to predict the quantum of working capital needed at different time
periods. A firm’s net working capital position is not important as an index of liquidity
but it is also used as a measure of the firm’s risk. Risk is the regard means chances of
the firm being unable to meet its obligations on due date. The lender considers a
positive networking as a measure of safety. All other things being equal, the more the
networking capital a firm has, the less likely that it will default in meeting its current

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financial obligations. Lenders such as commercial banks insist that the firm should
maintain a minimum net working capital position.

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CHAPTER 2
LITERATURE
REVIEW

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LITERATURE REVIEW
Bhatt V. V. (1972) widely touches upon a method of appraising working capital
Finance applications of large manufacturing concerns. It states that similar methods
need to be devised for other sectors such as agriculture, trade etc. The author is of the
view that banks while providing short-term finance, concentrate their attention on
adequacy of security and repayment capacity. On being satisfied with these two
criteria they do not generally carry out any detail appraisal of the working of the
concerns. Smith Keith V. (1973) believes that Research which concerns shorter range
or working capital decision making would appear to have been less productive. The
inability of financial managers to plan and control properly the current assets and
current liabilities of their respective firms has been the probable cause of business
failure in recent years. Current assets collectively represent the single largest
investment for many firms, while current liabilities account for a major part of total
financing in many instances. This paper covers eight distinct Approaches to working
capital management. The first three – aggregate Guidelines, constraints set and cost
balancing are partial models; two other approaches - probability models and portfolio
theory, emphasize future uncertainty and interdepencies while the remaining three
approaches -Mathematical programming, multiple goals and financial simulation have
a wider systematic focus. Natarajan Sundar (1980) is of the opinion that working
capital is important at both, the national and the corporate level. Control on working
capital at the national level is exercised primarily through credit controls. The Tandon
Study Group has provided a comprehensive operational framework for the same. In
operational terms, efficient working capital consists of determining the optimum level
of working capital, financing it imaginatively and exercising control over it. He

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concludes that at the corporate level investment in working capital is as important as
investment in fixed assets. And especially for a company which is not growing,
survival will be possible only so long as it can match increase in operational cost with
improved operational efficiency, one of the most important aspects of which is
management of working capital. Kaveri V. S. (1985) has based his writing on the
RBI‟s studies on finances of large public limited companies. This review of working
capital finance refers to two points of time i.e., the accounting years ending in 1979
and 1983 and is based on the data as given in the Reserve Bank of India on studies of
these companies for the respective dates. He observes that the Indian industry has by
and large failed to change its pattern of working capital financing in keeping with the
norms suggested by the Chore Committee. While the position of working capital
management showed some investment between 1975-79 and1979-83, industries have
not succeeded in widening the base of long-term funds to the desired extent. The
author concludes with the observation that despite giving sufficient time to the
industries to readjust the capital structure so as to shift from the first method to the
second method, progress achieved towards this end fell short of what was desired
under the second method of working capital finance. Bhattacharyya Hrishikes
(1987) tries to develop a comprehensive theory and tool of working capital
management from the system’s point of view. According to this study, capital is often
used to refer to capital goods consisting of a great variety of things, namely, machines
of various kinds, plants, houses, tools, raw materials and goods-in-process. A finance
manager of a firm looks for these things on the assets side of the balance sheet. For
capital he turns his attention to the other side of the balance sheet and never commits
a mistake. His purpose is to balance the two sides in such a way that net worth of the
firm increases without increasing the riskiness of the business. This balancing is

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financing, i.e., financing the assets of the firm by generating streams of liabilities
continuously to match with the dynamism of the former. The study is an improvement
of the concept of Park and Gladson who were not able to capture the entire techno
financial operating structure of a firm. Rao K.V. and Rao Chinta (1991) observe the
strong and weak points of conventional techniques of working capital analysis. The
result has been obviously mixed while some of the conventional techniques which
could comprehend the working capital behavior well; others failed in doing the job
properly. The authors have attempted to evaluate the efficiency of working capital
management with the help of conventional techniques i.e., ratio analysis. The article
concludes prodding future scholars to search for a comprehensive and decisive
yardstick in evaluating the working capital efficiency. Hamlin Alan P. and Heath
field David F. (1991) opine that working capital is necessary input to the production
process and yet is ignored in most economic models of production. The implications
of modeling the time dimension of production, and hence, the working capital
requirements of firms are explored with the particular stress placed on the competitive
advantage gained by firms that retained flexibility in the time structure of their
production. In this article they have attempted to explore only this most basic role of
time in the production process and so focus is on the implications of explicitly
recognizing the need for working capital. Zaman M. (1991) studies the working
capital management practices of Public Sector Jute Enterprises in Bangladesh which
have been found to be seriously affected. This has been attributed to several factors
like low demand for jute goods and serious competition in the international market,
insufficient inventory management policy, poor collection policy and inefficient cash
policy. The author has formulated a long term flexible and operational working
capital management model. In conclusion he has suggested the model which would

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certainly help improve the working capital management practices of the jute in
particular and other public enterprises as well in Bangladesh. Fazzari Steven M. and
Petersen Bruce C. (1993) throws light on new tests for finance constraints on
investment by emphasizing the often neglected role of working capital as both a use
and a source of funds. The authors believe that working capital is also a source of
liquidity that should be used to smooth fixed investment relative to cash-flow shocks
if firms face finance constraints. They have found that working capital investment is
“excessively sensitive” to cash flow fluctuations. Besides, when working capital
investment is included in a fixed-investment regression as a use or source of funds, it
has a negative coefficient. They conclude that controlling for the smoothing role of
working capital results in a much larger estimate of the long-run impact of finance
constraints than reported in other studies. Hossain Saiyed Zabid and Akon Md.
Habibur Rahman (1997) emphasize the basic objective of working capital
management i.e., to arrange the needed working capital funds at the right time, at right
cost and from right source with a view to achieving a trade-off between liquidity and
profitability. The analysis reveals that BTMC had followed an aggressive working
capital financing policy taking the risk of liquidity. There was uninterrupted
increasing trend in negative net working capital throughout the period of the study
which suggested that BTMC had exploited the entire short-term sources available to it
without considering the actual needs. Ahmed Habib (1998) points out that when the
interest rate is included; money loses its predictive power on output. The study
explicates this finding by using a rational expectations model where production
decisions of firm required debt finance working capital. Working capital is an
important factor and its cost, the rate of interest, affects the supply of goods by firms.
Monetary policy shocks, thus, affect the interest rate and the supply side, and as a

28
result price and output produced by firms. The model indicates that this can cause the
predictive power of monetary shocks on output to diminish when the interest rate is
used in empirical analysis. The model also alludes to the effects of monetary policy
on the price level through the supply side (cost push) factors. Prof. Mallick Amit and
Sur Debasish (1998) attempt to make an empirical study of AFT Industries Ltd, a tea
producing company in Assam for assessing the impact of working capital on its
profitability during the period 1986-87 to 1995-96. The author has explored the co-
relation between ROI and several ratios relating to working capital management. On
the whole, this study of the correlation between the selected ratios in the area of
working capital management and profitability of the company revealed both negative
and positive effects. Moreover, the WCL of the company recorded a fluctuating trend
during the period under study. Hossain, Syed Zabid (1999) throws light on the
various aspects of working capital position. He has evaluated working capital and its
components through the use of ratio analysis. For each aspect of analysis certain ratios
are computed and then results are compared with the standard ratio or industry
average. Singaravel, P. (1999) focuses on the interdependency among working
capital, liquidity and profitability, of which sufficiency of liquidity comes in the first
Preference followed by sufficiency of working capital and profitability. The article is
an in-depth analysis of liquidity and its interrelationship with working capital and
profitability. As the working capital, liquidity and profitability are in triangular
position, none is dispensable at the satisfaction of the other. Excess of stock-in-trade
over bank over-draft and excess of liquid assets over current liabilities other than bank
over-draft generate working capital for the business. Alternatively working capital
requirements are made for long-term funds which affect the profitability. Garg
Pawan Kumar (1999) focuses on the study of working capital trend and liquidity

29
analysis in the selected public sector enterprises of Haryana. The study suggests
forecasting of working capital requirement confined mainly to various components of
working capital. After considering the facts the author realized the need for proper
assessment and forecasting of working capital in the public sector undertaking. For
this purpose, he has suggested the analysis of production schedule, sales trend, labour
cost etc., should be taken into consideration. He further suggested the need for better
management of components of working capital. Batra G. S. and Sharma A. K.
(1999) analyze the working capital position of Goetze (I) Ltd. with the help of various
ratios. They are of the view that the working capital position in the company is quite
satisfactory although they have suggested a few measures for further improvement in
management of working capital, like necessity of greater attention in the inventory
control; active sales department, speedy dispatch of orders and reduction of
dependency on trade creditors. Batra Gurdeep Singh (1999) gives an overview of
working capital and its determinants. According to the author working capital
management involves deciding upon the amount and composition of current assets
and how to finance them. He emphasizes on the hedging approach to finance current
assets. He also adds that a management can use ratio analysis of working capital as a
means of checking upon the efficiency with which working capital is being used in
the enterprises. Bansal S. P. (1999) observes that due to the conservative policy of the
corporation i ) Short-term creditors position regarding their claim is threatened due to
lack of funds, ii ) The company was not following uniform policy regarding the
collection of debtors, and iii ) Inefficiency on the part of the management causes over
investment in inventories. As a result a serious situation arose due to shortage of
working capital. The author warns the corporation that if it did not plan its cash needs
properly, it would be lead to bankruptcy. Bansal S. P. (1999) opines that working

30
capital management refers to the management of current assets and current liabilities
for maintaining the optimum levels of various components and increasing the
profitability of an enterprise. The author has insisted on application of various
techniques for management of working capital and its three main components cash,
receivables and inventories. Pathania Kulwant Singh (1999) advocates for the bank
to concentrate to maximize profitability and make optimum utilization of cash
resources available, while at the same time taking care to economize cash holding
without impairing the overall liquidity requirements of the bank. For strengthening the
financial base of the bank, permanent working capital should be financed by equity
capital or other long-term sources, whereas temporary working capital should
generally be financed by short-term sources. The author is satisfied with the working
capital management of the bank, but sees scope for further improvement. Chalam G.
V. and Manohar Babu B. V. (1999) observe that liquidity performance is very low
as compared to the ideal norms. It is suggested that for managing working capital
effectively the operating and other required budgets should be prepared by the
respective levels of the management on short-term as well as long-term basis. It is
further suggested that these are the people concerned who can really influence the
process of production activity to such an extent that there should be optimum
utilization of the investment in working capital Rao Govinda D. (1999) believes that
changes in quantum of working capital are ascertained and analyzed. The author has
attempted to find out the causes of the changes in the size of working capital in the
sample companies during the period under study. He found several causes of changes
in working capital, mainly (a) sources of funds and (b) applications of funds. In the
end, the changes in working capital are analyzed with the help of the changes in
working capital and funds flow statement. Garg Pawan Kumar (1999) suggests that

31
working capital should be financed with both the sources – long-term as well as short-
term sources of funds. He further suggests that permanent working capital should be
obtained with the help of long-term sources of finance while variable/ fluctuating
working capital should be collected through short-term sources of finance. Efficient
utilization of working capital enhances operating efficiency as well as income of the
units. Singh O. N. (1999) discusses the credit needs of farmers / agriculture sector and
then emphasizes on the need for having a system of working capital finance in
agriculture on the lines of the industry and commerce finance, of course with some
changes. He advocates a system which is equally equipped and appropriate to meet
the needs of both the farmers as well as the bankers. His basic purpose is to strengthen
the capital base of the farmers Rao Govinda D. and Rao P. M. (1999) believes that
management of working capital is a continuous process requiring proper monitoring
and studying of the relationship of all variables with constant, and drawing inferences.
This provides proper direction to the managers. Jain P. K. and Yadav Surendra S.
(2001) study the corporate practices related to management of working capital in
India, Singapore and Thailand. In this paper the authors have tried to understand the
working capital management and current assets and current liabilities, and their inter-
relationship. Further the authors have shown an aggregative analysis of current assets
and current liabilities in terms of major liquidity ratios. It also states working capital
position in terms of these ratios pertaining to various industries. From the paper one
can infer that the available data in respect of the sample companies from the three
countries confirm the wide inter-industry variations in liquidity ratios. Towards the
end, the authors suggest that serious consideration needs to be given by the respective
governments as well as industry groups in these three countries in order to take
corrective measures to take care of and rectify the areas of concern. Deloof Marc.

32
(2003) presents a picture of how working capital management affects the profitability
of Belgium firms. The writer has made use of empirical analysis for the sample firms.
It was observed that most of the firms have a large amount of cash invested in
working capital. It can, therefore, be deduced that the way in which working capital is
managed will have a significant impact on the profitability of the firms. Howorth
Carole and Westhead Paul (2003) have tried to find out the working capital
management routines of a large random sample of small companies in the UK.
Considerable variability in the take-up of eleven working capital management
routines was detected. Principal components analysis and cluster analysis confirmed
the identification of four distinct “types” of companies with regard to the patents of
working capital management. While the first three types of companies focused upon
cash management, stock or debtors’ routines respectively, the fourth type was less
likely to take-up any working capital Management routines. The objective of the
study is to encourage additional research rather than to provide an exhaustive
overview of all the factors associated with the take-up of working capital management
routines by small companies. The results suggest that small companies focus only on
areas of working capital management where they expect to improve marginal returns.
Filbeck Greg and Krueger Thomas M. (2005) base their study on the ratings of
working capital management published in CFO magazines. The findings of the study
provides insight into working capital performance and working capital management,
which is explained by macro-economic factors, interest rates, competition, etc., and
their impact on working capital management. The article further studies the impact of
working capital management on stock prices. Meszek Wieslaw and Polewski
Marcin (2006) examine the profiles of selected construction companies from the
viewpoint of working capital formation and their management strategies applied to

33
working capital. The analysis is based on the financial ratios. The authors conclude
with the observation that complex working capital management requires controlling
methodology to be developed. A specific character of the construction industry,
including operational factors and market requirements make working capital
management a task exceeding the financial sphere, as it embraces the issues of
organization of investment processes, the organization of production processes and
logistics. Chowdhury Anup and Amin Md. Muntasir (2007) examine the working
capital management practice in pharmaceutical companies listed in Dhaka Stock
Exchange. Among all the problems of financial management, the problems of
working capital management have been recognized as the most crucial one. It is
because of the fact that working capital always helps a business concern to gain
Vitality and life strength. The objective of the study is to critically evaluate the
working capital management practices in the selected firms of the pharmaceutical
industry. To achieve this goal, the study also examines the policies and practices of
cash management and evaluates the principles, procedures and techniques of
inventory management, receivables management and payable management. From the
analysis, the authors conclude that the pharmaceutical firms operated in Bangladesh
efficiently deal with their liquidity preferences and investment criteria. And this is due
to the competitive nature of this industry. Thappa Sankar (2007) focuses on the
importance of proper working capital management of Sun Pharmaceutical Company.
The paper throws light on the concepts of working capital, working capital policy,
components of working capital and factors affecting working capital in the Sun
Pharma Industries Ltd during the last five years, and identifies certain factors which
are responsible for the improvement of working capital of the company. The article
concludes with a warning to the Company that if satisfactory level of working capital

34
is not maintained, the company would become bankrupt. Ganesan Vedavinayagam
(2007) studies the impact of working capital management on profitability through
ANOVA test where the financial statements of 349 telecom units or enterprises are
analyzed. The relationship between working capital management efficiency and
profitability and the impact of working capital management on the same has been
tested. At the end of the study the author has minutely observed that the working
capital management efficiency in telecommunication industry is poor. And he
suggests that the telecommunication industry should improve working capital
management efficiency. Appuhami Ranjith B. A. (2008) investigates the impact of
firms‟ capital expenditure on their working capital management. The data used in this
article was collected from listed companies in the Thailand Stock Exchange. In this
work the writer has used Shulman and Cox’s (1985) net liquidity balance and
working capital requirement as a proxy for working capital measurement and
developed multiple regression models. At the end it is derived that the firms‟ capital
expenditure has a significant impact on working capital management, and that the
firms operating cash flow which was recognized as a control variable, has a
significant relationship with working capital management. Samiloglu F. and
Demirgunes K. (2008) intend to analyse the effect of working capital management on
firm’s profitability. To consider statistically significant relationship between the
firm’s profitability and the components of cash conversion cycle at length, a sample
consisting of Istanbul Stock Exchange (ISE) listed manufacturing firms for the period
from 1989 to 2007 has been analyzed under a multiple regression model. Empirical
findings of the study show that accounts receivable period, inventory period and
leverage affect firm’s profitability negatively, while growth (in sales) affects firm’s
profitability positively. Ramudu Janaki P. and Rao Durga S. (2008) attempt to

35
analyze both concept and research based studies. Working capital may be regarded as
the lifeblood of any business unit. Its effective management can do much more to the
success of the business while its ineffective management will undoubtedly lead to
failure of the business. It is in this context that the management of working capital
assumes paramount importance. In the present scenario of competition, the business
does not have any other option than reducing the cost of its operations in order to
survive and continue to be financially healthy. It is in this connection effective
management of working capital forms an absolute part of cost reduction. As it is quite
vivid and evident in many researches in any manufacturing unit, barring knowledge
industry, the proportion of raw material in total cost of the product will be the highest
and hence, if the organization wants to minimize the cost of production it has to tackle
the cost of raw material first. So the authors have tried to analyze both the concept
and research based studies on working capital management in a business unit. Dinesh
M. (2008) explicates the concepts of working capital, the different challenges being
faced by the business firms in managing working capital and the strategies to be
adopted for its prudent management. The author concludes with the view that most of
the businesses failed not for want of profit but for lack of cash. The fast growth in
production and sales may cause the business to utilize all of the financial resources
seeking growth and making assets such as inventories, accounts receivable and other
assets as more illiquid. Narender Vunyale, Menon Shrijit and Shwetha V. (2008)
examine the determinants of working capital management in cement industry in India.
In this article, net liquid balance and working capital requirements were used by the
authors as measures of investing working capital management of the industry. The
factors like size, business indicator, firm performance, growth of the firm, debt-equity
ratio and operating cash flow are taken into consideration. Overall, the paper

36
concludes with the observation that only size of firm affects both net liquid balance
and working capital ratio in a company’s working capital management. The results
suggest that there is a lack of consistent evidence of the factors influencing working
capital management in the cement industry. Dr. Khatik S. K. and Jain Rashmi
(2009) state that the management of working capital is one of the most important and
key resources of an organization for its day-to-day operations. Working capital can be
taken as funding resources for routine activities of business. It is the most vital and
important part of fund management and profitability for business. The writer has
analyzed the working capital position of MPSEB (Madhya Pradesh State Electricity
Board) by ratio analysis technique and it was found that the position of current ratio,
quick ratio, acid-test ratio, working capital ratio, inventory turnover ratio are not up to
the standard benchmark. Sen Mehmet and Oruc Eda (2009) want to determine the
relationship between efficiency level of firms being traded in Istanbul Stock
Exchange (ISE) in working capital management and their return on total assets. In this
article they have made an attempt to explain the relationship between different
indicators relating to efficiency in working capital management and their return on
total assets through two models. The study concludes with the observation that
according to the results in terms of both, all the firms involved in the study and
sectors, there is a significant negative relationship between cash conversion cycle, net
working capital level, current ratio, accounts receivable period, inventory period and
returns on total assets. Ramachandran Azhagaiah and Janaki Raman
Muralidharan (2009) have attempted to analyze the relationship between working
capital management efficiency (WCME) and earnings before interest and taxes
(EBIT) of the paper industry in India during 1997-98 to 2005-06. To measure the
working capital management efficiency three index values i.e., performance index,

37
utilization index and efficiency index, and EBIT have been used for all the firms over
the period of the study. At the end of the study it was noted that Indian paper firms
performed remarkably well during the period. Industry overall efficiency index was
>1 in 3 out of 9 years for the study period. Though some of the sample units had
successfully improved efficiency during the three years, the existence of a very high
degree of inconsistency in this matter clearly points out the need for adopting sound
WCM (working capital management) policy in these firms. Baig Viqar Ali (2009)
aims at reporting comparative findings of a survey of working capital management
practices of selected agribusiness firms from diary co-operatives, private and MNC
diary firms as a part of the research thesis completed in July 2008. Besides, an attempt
has been made to know the effect of the ownership, government regulations,
managerial empowerment and cultural factor on the working capital decision making.
Bhunia Amalendu (2010) shows how Indian Pharmaceutical Industry has played a
key role in promoting and sustaining development in the vital field of medicines.
Financial analysis often assesses a firm’s production and productivity performance,
profitability performance, liquidity performance, working capital performance, fixed
assets performance, fund flow performance and social performance. The study
concludes with the observation that the financial performance of the selected
pharmaceutical liquidity position was strong in case of KAPL and RDPL, thereby
reflecting the ability of companies to pay short term obligations on due dates. Long-
term solvency in case of KAPL and RDPL in all the years shows that companies
relied more on external funds in terms of long-term borrowings, thereby providing a
lower degree of protection to the creditors. Debtors turnover ratio of RDPL needs to
be improved as the solvency of the firm depends upon the sales income generated

38
from the use of various assets. Singh Swaran and Dr. Bansal S. K. (2010) has
carried out a study of the structure of working capital, the management of inventory,
accounts receivable, accounts payable and cash. The authors have used the data from
the published annual reports of IFFCO and KRIBHCO starting from the year 1999-00
to 2006-07. The main objective of the present study is to examine and evaluate the
working management in IFFCO and KRIBHCO. The analysis has been done with the
help of various ratios to derive conclusions. It may be concluded that as far as
management of working capital is concerned, IFFCO was performing better than
KRIBHCO. Arun Kumar O. N. and Jayakumar S. (2010) explain how working
capital is considered to be the lifeblood and controlling nerve center of the business.
Profitability and solvency are two vital aspects of working capital management. The
survival and growth of the company depends upon the ability to meet profitability and
solvency. Here the authors have concentrated on the analysis of liquidity and solvency
position of the major Public Sector Electrical Industries in Kerala such as Kerala
Electrical and Allied Engineering Company Ltd (KEL) and Transformers and
Electrical Kerala Ltd (TELK) for the financial years 1997-98 to 2007-08 and 1997-98
to 2005-06 respectively. In conclusion the authors have made a few important
observations with regard to the companies. Both the companies show a trend of very
low level of solvency position. The liquidity position of the companies is below the
normal value. KEL has a lower level of net profit compared to TELK for the stated
period. In comparison with KEL, the sensitivity of changes in the level of current
assets is high in case of TELK.

39
CHAPTER 3
COMPANY
PROFILE
CHAPTER 3
COMPANY
PROFILE

40
COMPANY PROFILE
Hindalco Industries Ltd
Industry Metals
Founded 1958; 62 years ago
Headquarters Mumbai, Maharashtra India
Area served Worldwide
Key people Kumar Mangalam Birla(Chairman)
Products Aluminum and copper products
Revenue ₹130,542 crore (US$18 billion) (2019)
Net income ₹5,495 crore (US$770 million) (2019)
Total assets ₹152,631 crore (US$21 billion) (2019)
Number of employees 40000 (FY 2018)
Parent Aditya Birla Group
Website www.hindalco.com

41
Hindalco Industries Limited, metals Flagship Company of the Aditya Birla Group, is
the industry leader in aluminium and copper. With a consolidated turnover of US$18
billion, Hindalco is the world’s largest aluminium rolling company and one of Asia’s
biggest producers of primary aluminium. Its state-of-art copper facility comprises a
world-class copper smelter and a fertiliser plant along with a captive jetty. The copper
smelter is among the world’s largest custom smelters at a single location.
In India, the company’s aluminium units across the country encompass the gamut of
operations from bauxite mining, alumina refining, coal mining, captive power plants
and aluminium smelting to downstream rolling, extrusions and foils. Today, Hindalco
ranks among the global aluminium majors as an integrated producer and a footprint in
10 countries outside India.
The Birla Copper unit produces copper cathodes and continuous cast copper rods,
along with other by-products, including gold, silver, and DAP fertilisers. It is India’s
largest private producer of gold.
Hindalco has been accorded Star Trading House status in India. Its aluminium is
accepted for delivery under the High-Grade Aluminium Contract on the London
Metal Exchange (LME), while its copper quality is also registered on the LME with
Grade A accreditation.

42
HINDALCO’S PRODUCT PROFILE
• Hindalco is a leading domestic player in two metal business segments Aluminium &
Copper.
• The Aluminium division’s product range includes alumina chemicals, primary
aluminium ingots, and billets, wire rods, rolled products, extrusions, foils and alloy
wheels.
• This company has significant market share in all the segments in which it operates.
It enjoys domestic market share of 42% in primary aluminium, 63% in rolled
products, 20% in extrusions, 44% in foils & 31% wheels.
• As a step towards expanding the market for value-added products and services,
Hindalco has launched several brands in recent years, which include Aura for alloy
wheels, Fresh wrap for kitchen foils and ever last for roofing sheets. Our exclusive
showroom, the aluminium gallery, seeks to promote Hindalco products to its
customers. It is a platform for the company to showcase quality products to a quality
audience in an appropriate ambience. The exhibits include products like windows,
doors, furniture’s, ladders, roofing sheets & ceilings &cladding panels.
• Hindalco’s products are well received not only in the domestic market but also in the
international market. The company’s metal is accepted for delivery under the high-
grade aluminium contract on the LONDON METAL EXCHANGE (LME). The
company exports about 17% of its total sales volume of aluminium.
• The company’s alumina chemical business is a leader in manufacturing and
marketing of specialty alumina and alumina hydrate products in the country. These
specialty products find wide range in diversified industries including water treatment
chemicals, refractories, ceramics, croyloite, glass, fillers & plastics, conveyor belts
and cables, among others. The company also exports these alumina chemicals to over
30 countries covering North America, Western Europe & the Asian region.
• Birla copper, Hindalco’s copper division at Dahej in Gujarat, enjoys a leadership
position in India, having built over 40% of the domestic market shares within 3 years
it’s commissioning.

43
ALUMINIUM
Hindalco ranks among the global top five aluminium producers based on shipments
and is an integrated producer with low cost base and strong presence across the value
chain. Hindalco’s diverse aluminium downstream offerings –extrusions, flat-rolled
products, foils, wire rods, billets, etc. find applications in various industries ranging
from automobiles to packaging and pharmaceuticals.
Hindalco products cater to numerous markets, and provide for all industrial and
commercial requirements like:-
*Automotive and transport
Aluminium is used extensively in the transport industry due to its high strength to
weight ratio and its excellent impact absorption qualities. Western countries use an
average of 140kg of aluminium per vehicle, whereas it stands at 40kg per vehicle in
India.
Hindalco’s high-quality aluminium is preferred for its superior alloy composition and
metallurgical properties that meet stringent performance parameters. Our expertise is
backed by the superior Wag staff Air Slip casting technology. From brakes to
ignition, transmission to suspension, cooling and exhaust systems to windows and
structural, ornamentals to accessories, automobile heat exchangers and registration
plates, Hindalco’s superior aluminium material is for making the most precise
automobile components.
*Building and construction
Hindalco’s aluminium products are ideal for a multitude of building and construction
applications. Made of virgin aluminium, Hindalco’s products have a superior surface
finish with exact dimensions and meet all stringent quality standards. Aluminium’s
formability, high strength-to-weight ratio, corrosion resistance, and ease of recycling,
makes it the ideal material for a wide range of building and construction applications.
Aluminium is used in the construction of windows, doors and facades, and roofing
and cladding. Aluminium’s excellent material properties provide the basis for
intricate, stable and lightweight structures. Aluminium allows a high degree of pre-
fabrication, with a variety of finishes.

44
*Electricalsand electronics
Aluminium from Hindalco is preferred for its superior alloy composition and
metallurgical properties that meet stringent performance parameters. Hindalco’s
aluminium products are trusted for applications in power generation and transmission,
cables and conductors, lamp caps, cable wraps, marine applications, light reflectors,
heat sinks, solar panels, insulation, etc.
*Pharmaceuticalsand packaging
About 7 to 8 per cent of the total aluminium consumed in India is by the packaging
industry. Growing consumerism and the need for better branding of consumer
products has led to a sizeable growth in the packaging sector. Aluminium, by virtue of
its properties, is a better substitute to glass, tinplate, paper and jute.
Hindalco’s high-quality aluminium is preferred for its superior alloy composition and
metallurgical properties that meet stringent performance parameters. Our expertise is
backed by the superior Wag staff Air Slip casting technology. Hindalco’s aluminium
products are used in various packaging applications like can body, closure caps,
kitchen foils, tagger foil etc.
Copper
Hindalco’s copper division operates one of the largest single location customs copper
smelter in the world. Hindalco produces copper cathodes, continuous cast copper rods
in various sizes. Birla Copper is used in the manufacture of continuous copper rods
for wire, cable and transformer industries; and copper tubes for consumer durable
goods and other applications in the form of alloys and sheets. The co-product
sulphuric acid is used to produce phosphoric acid and value-added fertilisers like di-
ammonium phosphate (DAP).
Hindalco products and applications cater to various markets and industrial and
commercial requirements like:-
*Automotive and transport
Copper plays an instrumental role in the automotive industry. The total weight of
copper in a vehicle ranges from 15 kilos for a small size car like hatchbacks to 30
kilos for a high-end car.

45
Various components such as alternators, motors, actuators and the wire harness
system depend on high conductivity which is superbly offered by copper. More
copper will be needed as automotive electrical developments increases awareness,
safety, comfort and automation.
*Railways
Copper is indispensable to the development of electrical locomotives. The
modernisation and expansion of the railway network in India is a continuous exercise
requiring large amounts of copper and certain copper alloys for the overhead
electrification.
There is also a considerable use of copper in signalling systems, besides all the
miscellaneous needs for pantographs, switchgear, brake systems, motor windings,
commutator bars, large and small service stations, etc.
*Wire and cable industry
Copper is extensively used in building wires, communication cables, co-axial cables,
power cables, specialty and industrial cables. Copper’s high electrical conductivity,
ductility and tensile strength makes it an ideal metal in the wire and cable industry.
Birla Copper’s superior quality copper rods has been a preferred choice in this
industry for years.
Chemicals
Calcined Alumina’s: Calcined alumina is widely used in various industries. These
aluminas are classified on soda, degree of calcinations, fineness and particle size
distribution. These alumina grades are white crystalline powders that are
predominantly alpha alumina of high chemical purity and consistent physical
properties. The specific properties include extreme hardness, refractoriness, high
mechanical strength and resistance to wear abrasion, chemical attack, and corrosion.
Low soda grades provide excellent hot strength to the refractory body. Reactive
Alumina yield a low water demand with very good flow properties when used in low-
cement castables, ULCC and self-flow refractory mixes. Some alumina’s have
excellent grind ability. They are recommended for usage in grinding media, wear
resistant ceramic components and liners, owing to their superior packing
characteristics. Polishing alumina grades are produced through controlled calcination
and processing in order to obtain consistent particle hardness, shape and size
distribution. They provide a choice of oil absorption values within the product range.

46
CHAPTER 4
OBJECTIVES
OF
THE STUDY

47
OBJECTIVES OF THE STUDY
1. To analyze the working capital of Hindalco Industries Ltd.
2. To determine the liquidity and profitability of the company with the help of
Ratio Analysis
3. To suggest measures for improvement if necessary in the management of
Working Capital
4. To find out the financial strengths and weaknesses of the Hindalco Industries.
5. To study the overall operating efficiency and performance of the Hindalco
Industries.
6. The study is conducted to evaluate the returns to the Hindalco Industries.
7. To ascertain the efficiency with which the firm is utilizing its assets in
generating sales revenue.

48
CHAPTER 5
RESEARCH
METHODOLOGY

49
RESEARCH METHODOLOGY
“Methodology” implies more than simply the methods you intend to use to collect
data. It is often necessary to include a consideration of the concepts and theories
which underlie the methods. For instance, if you intend to highlight a specific feature
of a sociological theory or test an algorithm for some aspect of information retrieval,
or test the validity of a particular system, you have to show that you understand the
underlying concepts of the methodology. When you describe your methods it is
necessary to state how you have addressed the research questions and/or hypotheses.
The methods should be described in enough detail for the study to be replicated, or at
least repeated in a similar way in another situation. Every stage should be explained
and justified with clear reasons for the choice of your particular methods and
materials. There are many different ways to approach the research that fulfils the
requirements of a dissertation. These may vary both within and between disciplines. It
is important to consider the expectations and possibilities concerning research in your
own field. You can do this by talking to your tutors and looking at dissertations
written by former students on your course.
There are different types of research design depend on the nature of the problem and
objectives of the study. Following are the four types of research design.
 Explanatory Research Design
 Descriptive ResearchDesign
 Diagnostic ResearchDesign
 Experimental ResearchDesign

50
DESCRIPTIVE RESEARCH
Descriptive research is a study designed to depict the participants in an accurate
way. More simply put, descriptive research is all about describing people who take
part in the study. In descriptive research design a researcher is interested in escribing
a particular situation or phenomena under his study. It is a theoretical type of searcher
design based on the collection designing and presentation of the collected data.
Descriptive research design covers the characteristics of people, materials, Scio-
economics characteristics such as their age, education, marital status and income etc.
opinion of the people. Examples of such designs are the newspaper articles, films,
dramas, and documentary etc.
DATA COLLECTION
Data collection method is the integral part of research design. There are several data
collection methods, each with its own advantages and disadvantages. Data can be
collected in a variety of ways in different settings from different sources. The data
are classified into two categories, primary and secondary data.
Secondary Data:
Secondary data refers to data that was collected by someone other than the user.
Common sources of secondary data for social science include censuses, information
collected by government departments, organizational records and data that was
originally collected for other research purposes.

51
SOURCE OF DATA (SECONDARY DATA)
The data is collected from the following sources.
 Annual reports of Hindalco Industries
 Interaction with the related finance department.
METHODS OF DATA ANALYSIS
The data collected were edited, classified and tabulated for analysis. The analytical
tools used in this study are:
ANALYTICAL TOOLS APPLIED:
The study employs the following analytical tools:
1. Trend Analysis.
2. Ratio Analysis.
TREND ANALYSIS:
A trend analysis is a method of analysis that allows traders to predict what will
happen with a stock in the future. Trend analysis is based on historical data about the
stock's performance given the overall trends of the market and particular indicators
within the market.
RATIO ANALYSIS.
Ratio analysis is used to evaluate various aspects of a company's operating and
financial performance such as its efficiency, liquidity, profitability and solvency. The

52
trend of these ratios over time is studied to check whether they are improving or
deteriorating.

53
CHAPTER 6
LIMITATIONS
OF STUDY

54
LIMITATIONS
 Time and Area is restricted so it Difficult in data collection.
 Limited knowledge about the Hindalco Industries in the initial stages.
 Financial manager was reluctant for giving financial data of the Hindalco
Industries.
 The analysis and interpretation are based on secondary data contained in the
published annual reports of Hindalco Industries for the study period.
 Ratio itself will not completely show the Hindalco Industries’ good or bad
financial position.
 Inter firm comparison was not possible due to the non-availability of competitors
data.
 The study of financial performance can be only a means to know about the
financial condition of the Hindalco Industries and cannot show a through picture
of the activities of the Hindalco Industries.

55
CHAPTER 7
DATA
ANALYSIS
&
INTERPRETATION

56
BALANCE SHEET OF HINDALCO INDUSTRIES AS ON
MAR 2019, 2018, 2017, 2016, 2015 (RS. IN CRORES)
Table no 7.1
Particulars Mar'19 Mar'18 Mar'17 Mar'16 Mar'15
Liabilities
12
Months
12
Months
12
Months
12
Months
12
Months
Share Capital 222.49 223.05 222.72 204.89 206.52
Reserves & Surplus 48335.20 49227.69 47109.84 41954.59 37048.74
Net Worth 48557.69 49450.74 47332.56 42159.48 37255.26
Secured Loan 19528.98 20291.90 18459.58 23904.29 23015.07
Unsecured Loan .00 .00 4162.35 4540.49 5634.31
TOTAL LIABILITIES 68086.67 69742.64 69954.49 70604.26 65904.64
Assets
Gross Block 48529.76 48006.38 46570.17 32243.36 35340.01
(-) Acc. Depreciation 15006.98 13642.22 12185.89 .00 9280.12
Net Block 33522.78 34364.16 34384.28 32243.36 26059.89
Capital Work in Progress 981.82 736.73 711.55 3088.22 10743.63

57
Investments 25494.90 27025.26 29331.95 27311.26 21250.68
Inventories 11394.46 10738.38 9268.03 8405.49 8821.23
Sundry Debtors 2124.88 1737.25 1872.83 2014.76 1832.18
Cash and Bank 1579.87 1821.35 4335.18 326.47 984.18
Loans and Advances 6403.52 6305.78 6731.17 7051.96 6308.85
Total Current Assets 21502.73 20602.76 22207.21 17798.68 17946.44
Current Liabilities 12295.88 11923.86 15555.96 9206.25 8552.69
Provisions 1119.68 1062.41 1124.54 631.01 1543.31
Total Current Liabilities 13415.56 12986.27 16680.50 9837.26 10096.00
NET CURRENT ASSETS 8087.17 7616.49 5526.71 7961.42 7850.44
Misc. Expenses .00 .00 .00 .00 .00
TOTAL
ASSETS(A+B+C+D+E) 68086.67 69742.64 69954.49 70604.26 65904.64

58
PROFIT AND LOSS ACCOUNT OF HINDALCO INDUSTRIES
FOR THE YEAR ENDED (RS. IN CRORES)
Table no 7. 2
PROFIT & LOSS
ACCOUNT OF
HINDALCO
INDUSTRIES (in Rs.
Cr.)
MAR '19 MAR '18 MAR '17 MAR '16 MAR '15
12 mths 12 mths 12 mths 12 mths 12 mths
INCOME
Sales Turnover 45,749.16 43,446.04 39,383.12 36,713.05 36,869.21
Net Sales 45,749.16 42,809.15 36,936.61 34,270.81 34,525.03
Other Income 937.76 662.86 1,145.34 976.91 304.51
TOTAL INCOME 47,068.52 43,891.24 39,182.11 35,056.02 34,761.73
EXPENDITURE
Raw Materials 27,481.87 25,418.96 21,915.55 19,210.27 21,692.91
Power & Fuel Cost 6,936.94 6,030.11 5,898.67 6,508.06 5,200.77
Employee Cost 1,981.71 1,894.65 1,752.12 1,687.92 1,589.48
Other Manufacturing
Expenses
0.00 0.00 0.00 0.00 0.00
Miscellaneous
Expenses
5,483.63 4,760.59 3,656.41 3,326.79 2,557.54
TOTAL EXPENSES 41,884.15 38,104.31 33,222.75 30,733.04 31,040.70
OPERATING PROFIT 4,246.61 5,124.07 4,814.02 3,346.07 3,416.52
PBDIT 5,184.37 5,786.93 5,959.36 4,322.98 3,721.03

59
PBDT 3,501.33 3,886.39 3,636.49 1,932.84 2,083.94
Depreciation 1,693.16 1,617.32 1,427.97 1,282.02 837.03
Profit Before Tax 1,808.17 2,269.07 2,208.52 650.82 1,246.91
PBT (Post Extra-ord
Items)
1,808.17 2,269.07 2,208.52 650.82 1,246.91
Tax 605.01 792.33 596.35 98.92 321.75
REPORTED NET
PROFIT
1,205.43 1,436.49 1,556.89 551.90 925.16
Total Value Addition 14,402.28 12,685.35 11,307.20 11,522.77 9,347.79
Equity Dividend 269.46 269.40 238.78 223.49 206.52
Corporate Dividend Tax 37.90 21.77 0.00 0.00 39.29
PER SHARE DATA
(ANNUALISED)
Shares in issue (lakhs) 22,242.02 22,291.93 22,274.92 20,486.70 20,655.27
EARNING PER
SHARE (RS)
5.42 6.44 6.99 2.69 4.48
Equity Dividend (%) 120.00 120.00 110.00 100.00 100.00
Book Value (Rs) 218.31 221.83 212.49 205.79 180.37

60
FINANCIAL STATEMENT ANALYSIS:
HINDALCO INDUSTRIES IN THE FY
2014,2015,2016,2017,2018,2019
Table No 7.3
FINANCIAL STATEMENT 2019 (mn) 2018-19 2017-18 2016-17 2015-16 2014-15
Gross Fixed Assets (excluding
CWIP) 18,811 130,142 1,25,094 121,186 123,522 101,940
Capital Work-in-Progress (CWIP)** 592 4,097 2,063 1,814 4,214 14,111
Less: Accumulated Depreciation,
Amortization and Impairment 6,401 44,283 40,006 36,499 37,849 29,981
Net Fixed Assets 13,002 89,956 87,151 86,501 89,887 86,070
Investments 1,303 9,012 10,781 15,157 12,438 12,346
Other Non-Current
Assets/(Liabilities) (Net) (1,420) (9,825) (8,497) (6,737) (8,859) (7,235)
Net Current Assets 3,004 20,783 17,499 14,961 15,074 16,572
Capital Employed 15,889 109,926 1,06,934 1,09,882 1,08,540 1,07,752
Less: Loan Funds 7,576 52,415 52,074 63,817 67,552 68,467
Less: Non-Controlling Interest 1 9 9 6 381 956
Net Worth 8,312 57,502 54,852 46,059 40,607 38,329
Net Worth represented by :
Equity Share Capital 32 222 223 223 205 207
Other Equity:
Share Warrants - - - - - -
Equity
Component of
Compound
Financial
Instruments 1 4 4 4 3 -
Reserves and
Surplus 7,603 52,600 47,645 41,770 36,443 38,122
Other
Comprehensive
Income 676 4,676 6,980 4,062 3,956 -
8,312 57,502 54,852 46,059 40,607 38,329

61
Note: Figures for FY 2018-19, FY 2017-18, FY 2016-17 and FY 2015-16 are as per
Ind AS compliant financial statements. Previous periods figures are as per Previous
GAAP financial statement.
INTERPRETATION OF ABOVE TABLES
 The capital of Company increased by 20.6%. There is fall in share capital in 2016,
and 2019. Whereas, there is rise in the price in 2017 and 2018. This shows there is
fluctuation in the increase of share capital.
 There is a huge fluctuation in the rate of increase in reserves and surplus by 37%.
This shows that Company is effectively utilizing its reserves and surplus.
 The borrowings are also showing a fluctuating rate of increase in 2018, but it has
decreased in 2019. The borrowings has decreased at a very low rate this shows that
Company has a little amount of borrowings in this year.
 The investments are also decreasing but with lower rates whereas there was increase
the preceding years.
 Similarly advances rose by 60% in 2014-15, an increase of 34% in 2015-16,15%
increase in 2016-17 and finally decreased by 3.25% in 2017-18 but then it again
rose in 2019.
 There has been a consistent decline in the fixed assets over years in 2014-15 and
2015-16 it decreased by 1.4 % ,increased by 5% in 2016-17 and again decreasing by
7.5% in 2017-18.this is mainly due to increase in the rate of depreciation in the
subsequent years.
 A huge fluctuation is revealed from current assets. It increased by 37% in 2014-15,
rate of increase rose to 80% in 2015-16 and then it increased at a much lower rate
i.e. at 10%.this shows that the Company is effectively utilizing its working capital.

62
there is a fall in current assets in 2017-18 by 8 %.this is mainly due to the
repayment of deposits in the years 2017-18. But there was again increase in 2018-19
by 5%.
 The income of the company increased by 28% in the five financial years showing
profit over time though with various fluctuations.
 The Net Fixed Assets increased by 20% in these five years while there was a
decrease noticed in the financial year 2016-2017, by 1%, after which increase was
noticed.
TREND ANALYSIS OF HINDALCO INDUSTRIES
Trend analysis of Hindalco Industries from 2015-2016 To 2019-2020
(Base year 2015-16)
REVENUE AND NET INCOME, EPS GROWTH RATE

63
INTREPRETATION
Revenue or turnover or top line is income that a company receives from its normal
business activities. Revenue Growth is used to measure how fast a company's
business is expanding. The figure shows the annual rate of increase/decrease in a
company's revenue or sales growth in terms of percentage change from the previous
year.
An ideal company should have a steady upward trend. Year-over-year performance is
frequently used by investors seeking to gauge whether a company's financial
performance is improving or worsening.
RESERVES AND DIVIDENDS GROWTH RATES
INTREPRETATION
Retained Earnings Growth is the percent increase / decrease of a company's retained
net income or reserves/surplus over time. A company can use retained earnings to
maintain current operations, or to invest in new ventures. Generally speaking, retained
earnings growth is accompanied by subsequent increases in sales and profitability.
DAILY SALES OUTSTANDING

64
INTREPRETATION
Days Sales Outstanding or DSO is also known as "average collection period and
receivable days". It's a measure of the average time it takes to collect the cash from
sales, in simple words, how fast customers pay their bill. DSO does tend to vary a
good deal by industry sector.
A high DSO may be a red flag, which suggests that customers aren't paying their bills
in a timely fashion. Maybe the customers themselves are in financial trouble or maybe
the company's operations and financial management are poor. If the DSO is rising
rapidly, you should know why.
DSO = Accounts Receivables / (Revenue / 365)

65
RATIO ANALYSIS OF HINDALCO INDUSTRIES
EARNING PER SHARE:
2019 2018 2017 2016 2015
Adjusted EPS (Rs.) 5.42 7.90 6.61 2.70 7.28
Adjusted Cash EPS (Rs.) 13.03 15.16 13.02 8.96 11.33
Reported EPS (Rs.) 5.42 6.44 6.99 2.69 4.48
Reported Cash EPS (Rs.) 13.03 13.70 13.40 8.95 8.53
Dividend Per Share 1.20 1.20 1.10 1.00 1.00
Operating Profit Per Share
(Rs.)
19.09 22.99 21.61 16.33 16.54
Book Value (Excl Rev Res)
Per Share (Rs.)
218.31 221.83 212.49 205.79
180.3
7
Book Value (Incl Rev Res)
Per Share (Rs.)
218.31 221.83 212.49 205.79
180.3
7
Net Operating Income Per
Share (Rs.)
205.69 192.04 165.82 167.28
167.1
5
Free Reserves PerShare (Rs.) 0.00 0.00 0.00 0.00 0.00
INTREPRETATION:
Earning Per Equity Share = Net Profit after Tax –Preference Dividend
No. of Equity shares
Earnings per Share are the most commonly used data which reflects the performance
and prospects of the Hindalco Industries. It affects the market price of shares. Here
the Earning Per Share is shows a persistent increase till the year 2015 after that in the
year 2016 Earnings Per share is followed by a downfall due to decline in profits.
Though again there was rise in the profits till 2018 and downfall in 2019.

66
DIVIDEND PER SHARE:
Dividend per Share = Dividend Paid To Equity Shareholders
No. Of Equity Shares
Dividend per share (DPS) is the sum of declared dividends issued by a company for
every ordinary share outstanding. The dividend of Hindalco Industries was having
marginal fluctuations over last five financial years and no major rise or fall was
noticed.
PROFITABILITYRATIOS:
2019 2018 2017 2016 2015
Operating Margin (%) 9.28 11.96 13.03 9.76 9.89
Adjusted Cash Margin (%) 6.20 7.72 7.64 5.20 6.60
Adjusted Return On Net
Worth (%)
2.48 3.56 3.10 1.31 4.03
Reported Return On Net
Worth (%)
2.48 2.90 3.28 1.30 2.48
Return On long Term Funds
(%)
5.44 6.68 6.68 4.60 5.74
INTREPRETATION:
Profitability ratio is used to evaluate the company’s ability to generate income as
compared to its expenses and other cost associated with the generation of income
during a particular period. This ratio represents the final result of the company.
OPERATING MARGIN:
 Operating Margin = Operating Profit / Net Sales * 100
o OM = OP / NS * 100
Operating margin takes into account the costs of producing the product or services
that are unrelated to the direct production of the product or services, such as overhead
and administrative expenses. The operating margin percentage of Hindalco Industries
was maximum in 2017 but there was decreasing margin after that.

67
RETURN ON NET WORTH:
Return on Net Worth = Net Profit After Interest And Tax x 100
Shareholder’s Funds
The net profit after interest and tax have increased slowly till the year 2015 followed
by a downfall due to high interest payments, operating expenses and taxation liability.
Consequently the net worth ratio has declined considerably and has reduced to more
than half in the year 2016 than it was in 2012.
LEVERAGE RATIOS:
2019 2018 2017 2016 2015
Long Term Debt / Equity 0.32 0.35 0.39 0.57 0.62
Owners fund as % of total
Source
71.31 70.90 67.66 59.71 56.52
Fixed Assets Turnover Ratio 0.66 0.61 0.53 0.50 0.54
INTREPRETATION:
Leverage ratios are used to determine the relative level of debt load that a business
has incurred. A high ratio indicates that a business may have incurred a higher level of
debt than it can be reasonably expected to service with ongoing cash flows. The
leverage ratio of Hindalco Industries has been substantially growing by margin of 2%
to 3% per year in the preceding years.
 Debt Ratio- Total debt/Total Assets
 Debt to Equity Ratio – Total Debt/ Total Equity
LIQUIDITY RATIOS:
2019 2018 2017 2016 2015
Current Ratio 1.60 1.59 1.33 1.81 1.78
Current Ratio (Inc. ST
Loans)
1.01 1.07 1.06 1.24 1.13
Quick Ratio 0.75 0.76 0.78 0.95 0.90
Fixed Assets Turnover Ratio 0.66 0.61 0.53 0.50 0.54

68
INTREPRETATION:
Liquid ratio is also known as ‘Quick’ or ‘Acid Test ‘Ratio. Liquid assets refer to
assets which are quickly convertible into cash. Current Assets other stock and prepaid
expenses are considered as quick assets.
Quick Ratio = Total Quick Assets
Total Current Liabilities
Quick Assets = Total Current Assets – (Inventory + Prepaid expenses)
A quick ratio of 1:1 is considered favorable because for every rupee of current
liability, there is at least one rupee of liquid assets. A higher value of ratio is
considered favorable. Here this ratio is less than 1 in 2012, 2013&2016 but in
2014&2015 it is close to 1 which is not satisfactory. This means the Hindalco
Industries has not managed its funds properly in this particular period. Therefore
Hindalco Industries should rationally utilize its funds to maintain an ideal liquid ratio
FIXED ASSETS TURNOVER RATIO:
Fixed Assets Turnover Ratio = Cost of goods sold or Sales
NetFixed Assets
Here the fixed assets employed in the business shows a decreasing trend except in the
year 2015 where fixed assets have again increased. This may be due to increase in rate
of depreciation in subsequent years. Nevertheless the fixed assets turnover ratio has
been consistently increasing. It indicates that fixed assets have been effectively used
in the business without much additional investment in the period of study and also the
capital is not blocked in fixed assets.
PAYOUT RATIOS:
2019 2018 2017 2016 2015
Dividend pay-out Ratio (Net
Profit)
9.29 8.82 7.99 12.18 11.71
Dividend pay-out Ratio (Cash
Profit)
9.29 8.82 7.99 12.18 11.71
Earning Retention Ratio 77.65 84.71 83.78 59.66 86.26
Cash Earnings Retention
Ratio
90.71 92.03 91.77 87.83 91.18

69
INTREPRETATION:
Dividend Pay-out Ratio - Dividend per share
Earnings per share
The payout ratio is a financial metric showing the proportion of earnings a company
pays shareholders in the form of dividends, expressed as a percentage of the
company's total earnings. Hindalco industries show rise in DPR from the year 2017 in
the year 2019. Though there was fall in DPR in the FY 2017.
COVERAGE RATIOS:
2019 2018 2017 2016 2015
Adjusted Cash Flow Time
Total Debt
6.74 6.01 7.80 15.49 12.24
Financial Charges Coverage
Ratio
3.08 3.19 2.51 1.81 2.63
Fin. Charges Cov. Ratio (Post
Tax)
2.72 2.61 2.28 1.77 2.08
INTREPRETATION:
1. 1. Interest Coverage Ratio (ICR) = EBIT
2. Interest Expenses
3.
4. 2. Debt Service Coverage Ratio (DSCR) = Net Operating Income
5. Total Debt Service
6. 3. Asset Coverage Ratio (ACR) = (Total Tangible Assets – Short Term Liabilities)
Total Outstanding Debt
The fixed charge coverage ratio is a financial ratio that measures a firm’s ability to
pay all of its fixed charges or expenses with its income before interest and income
taxes. The coverage ratio shows a substantial rise in the year 2016, after that the
company’s adjusted cash flow has shown decline by huge margin in the year 2017,
2018, and 2019 respectively.

70
COMPONENTRATIOS:
2019 2018 2017 2016 2015
Material Cost Component(%
earnings)
60.07 59.37 59.33 56.05 62.83
Selling Cost Component 0.00 0.00 0.00 0.00 0.00
Exports as percent of Total
Sales
29.44 43.38 0.00 36.44 38.63
Import Comp. in Raw Mat.
Consumed
0.00 0.00 0.00 76.64 68.07
Long term assets / Total
Assets
0.73 0.75 0.74 0.78 0.76
Bonus Component In Equity
Capital (%)
22.11 22.06 22.08 24.00 23.81
INTREPRETATION:
The MCC of the industry differs by 1% or less every year the preceding years.
Whereas, SCC was nil. The exports as percent of total components differed with huge
figures in 2019, than 2018. The increase in bonus shares shows minimal difference in
the last five years financial figures.

72
FINDINGS
 Ratios are means for presenting numerical relationships between items or
groups of items. A ratio is determined by dividing one item in a relationship
with the other.
 Generally, financial ratios are computed from financial statements and so
ratios developed for an analysis of a firm’s performance and financial position
are subject to the same limitations, which are present in the accounting
statements themselves.
 Ratios are used in the analysis of financial statements of a business in order to
reveal underlying economic trends in its activities and to discover its
STRENGTHS AND WEAKNESSES as compared with the trends of sister
companies.
 Capital investment decisions are long-term corporate finance decisions relating
to fixed assets and capital structure.
 Making big investment decisions means that we must allocate substantial
amounts of major resources of people, time, technology, intellectual capital,
and, of course, money
 The working capital is increasing in comparison to last year which is good for
the liquidity of the company.
 During the year, the Hindalco Industries has pursued a strategy of prioritizing
capital conservation, liquidity management and risk containment given the
challenging economic environment. This is reflected in the Hindalco Industries’
strong capital adequacy and its focus on reducing its wholesale term deposit base
and increasing its CASA ratio. The Hindalco Industries is maintaining excess

73
liquidity on an ongoing basis. The Hindalco Industries has also placed strong
emphasis on efficiency improvement and cost rationalization. The Hindalco
Industries continues to invest in expansion of its branch network to enhance its
deposit franchise and create an integrated distribution network for both asset and
liability products.
 In line with the above strategy, the total deposits of the Hindalco Industries were
Rs. 218,348 crore (US$ 43.0 billion) at March 31, 2016, compared to Rs.
244,431 crore (US$ 48.2 billion) at March 31, 2015. The reduction in term
deposits by Rs. 24,970 crore (US$ 4.9 billion) was primarily due to the Hindalco
Industries’ conscious strategy of paying off wholesale deposits. During Q4-
2016, total deposits increased by Rs. 9,283 crore (US$ 1.8 billion), of which Rs.
5,286 crore (US$ 1.0 billion), or about 57%, was in the form of CASA deposits.
The CASA ratio improved to 28.7% of total deposits at March 31, 2016 from
26.1% at March 31, 2015.
 The branch network of the Hindalco Industries has increased from 755 branches
at March 31, 2014 to 1,438 branches at April 24, 2016. The Hindalco Industries
is also in the process of opening 580 new branches which would expand the
branch network to about 2,000 branches, giving the Hindalco Industries a wide
distribution reach in the country.
 In line with the strategy of prioritizing capital conservation and risk containment,
the loan book of the Hindalco Industries decreased marginally to Rs. 218,311
crore (US$ 43.0 billion) at March 31, 2016 from Rs. 225,616 crore (US$ 44.5
billion) at March 31, 2015.
 Liquidity position: The liquid ratio of the Hindalco Industries in the year
2012,2013 and 2016 is 0.60,0.67and 0.68 respectively and the year 2014 and

74
2015 liquid ratio is 0.97 and 0.88 respectively which is close to 1.Though it is
not equal to the ideal liquid ratio of 1:1 but still its under control. So in nut shell,
it can be concluded that the liquidity position of the Hindalco Industries is quite
satisfactory.
 Capital adequacy and return on capital employed: The Hindalco
Industries’ capital adequacy at March 31, 2016 as per Reserve Hindalco
Industries of India’s revised guidelines on Basel II norms was 15.5% and Tier-1
capital adequacy was 11.8%, well above RBI’s requirement of total capital
adequacy of 9.0% and Tier-1 capital adequacy of 6.0%. The above capital
adequacy takes into account the impact of dividend recommended by the Board.
Also the capital is being effectively utilized in the Hindalco Industries as it
shows better return on capital employed over years.
 Asset quality: At March 31, 2016, the Hindalco Industries’ net non-
performing asset ratio was 1.96%. During the year the Hindalco Industries
restructured loans aggregating to Rs. 1,115 crore (US$ 220 million).
 Dividend on equity shares: Since the dividend per share has shown a
promising increase for the period under study. It shows that the Hindalco
Industries is following a sound dividend policy and is capable of distributing
higher dividends. In this way the investors will feel investing in capital of the
Hindalco Industries a much beneficial option and will be reluctant to withdraw
capital for a long time.
 Earnings per share: The earnings per share for the period under study also
show a promising increase. It suggests that Hindalco Industries has better
profitability position and in future it can be a better or attractive channel of
investment for shareholders.

75
 Higher trends of credit deposit ratio – A positive sign: High trends
of credit deposit ratio reveals that Hindalco Industries has performed
satisfactorily as regard to granting loans and advances to generate income. It
suggests that credit performance is good and the Hindalco Industries is doing its
business well by fulfilling its major objective as regards to granting loans and
accepting deposits.

77
SUGGESTIONS
1) The company should concentrate more on the Cash and Bank Balance side. As
the Reserves and Surplus are decreasing year by year whereas the Debts / Loans
are increasing. It should be controlled.
2) Hindalco has been paid the major portion of its earnings as dividend when
compared to previous years (2016-17). The enterprise has to retain some more
amounts of its earnings for the future use. The enterprise may have some
extension plans for future.
3) Hindalco will have to consider the steep increase in the Current Liabilities in
financial year 2015-16. The Firm should take measures to control and repay
them as far as possible.
4) The company should keep sufficient cash or bank balance in order to meet its
liability immediately. Otherwise it will adversely affect the liquidity position of
the company.
5) There should be a proper management for the effective utilization of Current
Assets and Fixed Assets in order of making sales.
6) Hindalco should develop a proper method for identifying budgeted sales. The
raw material consumption is to be controlled according to the budgeted sales.
This will helps to increase their operating profit as well as gross profit.
7) The company should focus on the debtors side, as the number of debtors goes
on increasing each year. Increasing number of debtors leads to lower working
capital.
8) The company should adopt proper sales strategy and their collection facilities.

78
9) A formal Inventory policy should be drawn out in respect of Raw Materials, as
it is a critical area for the Company
The overall profitability and efficiency of the business should enhance. Otherwise the
business cannot obtain satisfactory return on capital invested and return on Total
Assets.

80
CONCLUSION
Hindalco Industries Limited is a leading Aluminum producing industry under the
flag ship of Aditya Birla Group. As the working capital is essential for the smooth
running of a business it is important to study whether the Hindalco Industries Ltd.
has achieved adequate amount of working capital or not. Maintaining adequate
working capital ensures the improvement of profitability. The finance manager
always tries to maintain an adequate working capital at every time so as to carry on
operations successfully and maximize the return on investment. Better working
capital will reduce interest cost. The study has helped to have a clear understanding
of the working capital management and also arrived at the following conclusions:
 Firm has a good working capital management policy.
 Firm is able to meet its both short term and long term obligations.
 Firm is able to continuously decrease its receivables period
 The firm’s turnover ratio is up to the mark
The firm is continuously indulged in expansion policy and is making optimum
utilization of funds.

82
BIBLIOGRAPHY
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Enterprises in Bangladesh, Indian Journal of Accounting, Vol. XXII, pp. 45-60.

83
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