Parvesh Aghi has over 23 years of experience working in finance roles for various companies. He currently works as a visiting faculty at several business schools. He specializes in teaching subjects related to working capital management. Efficient working capital management is important for companies as it helps maintain smooth operations and can improve earnings. Key aspects of working capital management include inventory management, managing accounts receivable, and accounts payable. SRF Ltd is used as a case study, demonstrating techniques like inventory optimization, cash management systems, and the benefits of efficient working capital.

1. WORKING
CAPITAL
MANAMENT
PARVESH AGHI

2. Profile
Parvesh Aghi
B. Com , FCA
PROFILE
Qualification:
 Chartered Accountant, 1985
 B Com ( Hons) from Delhi University, 1983
Worked in Industry for 23 years in following
Companies:
 Idea Cellular Ltd (GM finance)
 Grasim Industries Ltd (Sr Manager)
 Reliance Communication Ltd (Vice President)
 SRF Ltd (Chief Manager)
 Hero Group Company (CFO)
 Ballarpur Industries Ltd (Manager)

3. Teaching Experience
Working as Visiting faculty with Fore school of management ,Shiv Nadar university , Adjunct Faculty with O.P Jindal
Global University & Law school , Haryana , Bennett University ,Greater Noida , Munjal University ( HERO GROUP) ,
Gurgaon and also conducting management development workshops for various corporate on subjects like GST and
business laws etc.
Visiting professor for many Institutes & associated with various recognized business schools in New Delhi /NCR
mentioned below:
Also giving online lectures for ICAI & other universities
I. Institute of Chartered Accountant of India – My video recordings on finance subjects are available on cloud
campus of ICAI for CA students
II. Association of Certified Chartered Accountants of England (ACCA)
III. Apeejay School of Management, Dawarka
IV. BM Munjal University
V. Fortune International Institute of Business
VI. Grant Thornton
VII. UNVERSITY 18 Gurgaon

4. One day workshop at INDIAN OIL CORPORATION “ Impact of GST on
hydrocarbon industry”
4

5. GST WORKSHOP FOR CORPORATES
5

6. Working Capital Management
it is a business strategy designed
to ensure that a company
operates efficiently by monitoring
and using its current assets and
liabilities to the best effect.

7. Efficient Working Capital
Management
Efficient working capital
management helps maintain
smooth operations and can also
help to improve the company's
earnings and profitability

8. Efficient Working Capital
Management
Management of working
capital includes
inventory management and managem
ment of accounts receivables and
accounts payables.

9. What is a Working Capital Cycle?
The Working Capital Cycle for a
business is the length of time it
takes to convert the total net
working capital (current
assets less current liabilities)
into cash.
Businesses typically try to
manage this cycle by
selling inventory quickly,
collecting revenue from
customers quickly, and paying
bills slowly to optimize cash
flow.

10. Working capital cycle
Working capital cycle =
inventory days + receivable
days – payable days

11. Working capital cycle sample
calculation
Inventory days = 85 Receivable days =20 Payable days = 90
Working capital cycle=
85+20-90= 15
This means the
company is only out of
pocket cash for 15 days
before receiving
receiving full payment

12. SRF LTD – CASE STUDY
SRF Limited is a multi-
business chemicals
conglomerate
Engaged in the
manufacturing of industrial
and specialty intermediates.
The company’s business
portfolio covers
Fluorochemicals, Specialty
Chemicals, Packaging Films,
Technical Textiles, Coated
and Laminated Fabrics
Fluorochemicals are used for refrigerants, aluminum production and blowing agent.

13. SRF LTD
12 manufacturing
plants in India, 2 in
Thailand and one in
South Africa.
Exports its products to
more than 75 countries
Incorporated on 9th
January 1970
Nylon Tyre Cord Fabric
Plant at Manali Chennai
& Malanpur , Gwalior ,
Gummidipoondi in
Chennai

14. SRF LTD FINANCIALS
Market Cap*
38,050 crores
Current share
price Rs 6,450
ROE 22.2%
EPS Rs 173 PE Ratio 38.2
Large cap top 100 companies

15. SRF LTD
Book value Rs
921
Industry PE
15.5
Current Ratio
.95
Interest
coverage ratio
9.5
Sales 7,650
crores
Debt equity ratio
.41 (.71 LY)

16. Share price graph 1 year

17. Share price graph 5 years

18. SRF LTD’ CURRENT ASSETS

19. SRF LTD’ CURRENT LIABILITIES

20. LIQUIDITIY RATIOS
Inventory Days 64 65 66 68.5 58

21. Investment
ESOP 10,000
Shares @ Rs 9 = Rs
90,000 in the Year
1997
Current value = Rs
6,45,00,000
CAGR = 25%

22. SRF LTD TCF CUSTOMERS
MRF Tyres Apollo CEAT
Michelin JK Tyres Bridgestone
Goodyear Falken Tyres

23. Nylon Tyre Cord Fabrics
Nylon Tyre Cord Fabrics (NTCF) are used
as reinforcements in tyres to give them
strength and durability.
They provide shape to the tyres and
support the weight of the vehicle.
They are designed to keep tyres running
longer and have significant effect on the
performance of the tyres.
It is a loosely woven fabrics comprised of warp cords in the
longitudinal direction and weft yarns oriented in the
lateral direction …..weft yarn melts in tyre manufacturing

24. CAPROLACTUM
Caprolactam is the basic raw
material of Nylon-6 and almost all
the Caprolactam produced in India
is used for manufacture of Nylon.
Caprolactam is consumed in the
production of nylon fibers

25. Spin finish oil
Spin finish oil for polyester staple
fiber, this product is made via
presently advanced processing
techniques, which is capable of
being applied for pre-spining and
post-spining of terribleness,
short-fibre, boasting highly
satisfying neatening effect,
especailly in that it makes.

26. Tyre Cord Yarn
Tyre Cord Bobbins Tyre Cord Yarn

27. TYRE CORD FABRIC LOOMS

28. MANUFACURING STAGES
CAPROLACTUM
CHIPS
YARN
FABRIC
Polymerization of caprolactam to
manufacture nylon chips.
Melt chips to manufacture
nylon tyre yarn
Weaving on fabrics is
done on looms

29. Manufacturing process
Polymerization of
caprolactam to
manufacture nylon
chips.
Extraction and
drying of chips.
Melt spinning of
chips to
manufacture nylon
tyre yarn.
Preparation of
cordfrom tyre
yarn by twisting
and plying.
Recycling of
nylon-6 waste.

30. SIX SIGMA COMPANY
Six Sigma (6σ) is a set of techniques and
tools for process improvement. It was
introduced by American engineer Bill
Smith while working at Motorola in
1986.
A six sigma process is one in which
99.99966% of all opportunities to
produce some feature of a part are
statistically expected to be free of
defects.
100%%-99.99966%= 0.000034
0.000034 X 10,00,000 =3.4

31. SIX SIGMA COMPANY
Six Sigma is a disciplined, data-
driven approach and methodology
for eliminating defects (driving
toward six standard deviations
between the mean and the
nearest specification limit) in any
process – from manufacturing to
transactional and from product to
service.

32. Six sigma
“Six Sigma is a quality program that,
when all is said and done, improves your
customer’s experience, lowers your
inventory and builds better leaders. —
Jack Welch
Six Sigma at many organizations simply means a measure of
quality that strives for near perfection. It can be called “Six
Sigma,” or it may have a generic or customized name for the
organization like “Operational Excellence,” “Zero Defects,” or
“Customer Perfection.” It helps to reduce costs , levels of inventory , quality of goods and
customers pays in time ……..efficient working capital management

33. The statistical representation of Six Sigma describes quantitatively how a process is performing.
To achieve Six Sigma — statistically — a process must not produce more than 3.4 defects per
million opportunities. A Six Sigma defect is defined as anything outside of customer
specifications. A Six Sigma opportunity is then the total quantity of chances for a defect. Process
sigma can easily be calculated using a Six Sigma calculator.
The fundamental objective of the Six Sigma methodology is the implementation of a
measurement-based strategy that focuses on process improvement and variation reduction
through the application of Six Sigma improvement projects. This is accomplished through the
use of two Six Sigma sub-methodologies: DMAIC and DMADV.

34. SRF won the Deming Prize in 2004
Recognizing businesses worldwide for
excellence in applying the principles of
Total Quality Management
SRF is the first tyre-cord company in
world to win the
prestigious Deming Application Prize.
JUSE is spearheading the TQM initiative
in Japan.

35. Chips are stored in large silos
Storage capacity of silos = 400 MT

36. Inventory Management
Inventory management is a systematic
approach to sourcing, storing, and
selling inventory—both raw materials
(components) and finished goods
(products).
In business terms, inventory
management means the right stock, at
the right levels, in the right place, at the
the right time, and at the right cost as
well as price.

37. Inventory Management
For any manufacturing, managing inventory
smartly is critical to the company's success.
You need to know what you have in stock,
where it is, where it's going, and how much it's
worth.
And in today's connected world, you also want
to be able to track your inventory as it moves
between suppliers, customers, production and
distribution to ensure that your data is always
accurate and up to date.

38. Oracle Cloud Inventory Management
Gain full visibility and control
of the flow of goods across
an organization’s global
supply network enabling
them to optimize inventory,
service levels and working
capital while decreasing
costs and increasing
customer satisfaction.
you can optimize the flow of goods throughout your organization and efficiently manage
your global inventory. Whether you are a small company or a global company
organization

39. Oracle Cloud Inventory Managemen
Intelligent inventory management is crucial to the
success of a company
.Effectively managing inventory balances, movement,
and turnover affects your bottom line, and save you time
and money.
Oracle Inventory Management Cloud is a complete,
modern materials management solution that can help
you effectively manage the flow of goods across your
business organizations.
This true cloud solution offers accurate and real-time
inventory balance visibility, efficient warehouse
organization, rapid material movement, improved
productivity, optimized transportation plans, and
ultimately—satisfied and returning customers.

40. Oracle Cloud Inventory Management
Complete, modern
materials management
solution
Manages inventory
balances , movement &
turnover
Saves time and money and
improves bottom line
effectively manage the flow
of goods across the
organization
accurate and real-time
inventory balance visibility,
efficient warehouse
organization, rapid material
movement, improved
productivity, optimized
transportation plans,

41. Oracle Cloud Inventory Management
Key Features
Improve operational efficiency with standard
processes
Enable full visibility and stay connected with
third party providers
Empower employees with self-service
requisitions to purchase or transfer material
Reduce inventory and costs

42. Inventory Management
Techniques
ABC Analysis
Just-in-time (JIT)
Method
Safety Stock
Inventory
Material
Requirement
Planning (MRP)
Technique
Dropshipping
Order Quantity
(EOQ) Model

43. ABC Analysis
ABC analysis is a technique of sorting of
inventories into 3 categories.
The categorization of the inventory
under the ABC analysis is done
according to how well the inventory
can sell and how much it will cost to
hold.

44. Just-in-time (JIT) Method
Just-in-time is a Japanese technique of
inventory management, in this technique
the company maintains only such
quantity of inventory as it requires during
the manufacturing/production process.
It implies no excess inventory in hand and
saves the cost of warehousing, shipping,
insurance and another allied cost.

45. Safety Stock Inventory
Safety stock is an extra
quantity of a product which
which is stored in the
warehouse to prevent an
out-of-stock situation. It
serves as insurance against
fluctuations in demand

46. Material Requirements Planning
Planning and decision-making tool
used in the production process
which analyses current inventory
levels vs production capacity and the
the need to manufacture goods,
based on forecasts. MRP schedules
production as per bills
of materials while minimizing
inventory.

47. Dropshipping
Dropshipping is a business
model, it allows to sell and
ship commodities without
owning and stocking them.
This technique of inventory
management eliminates the
cost of inventory holding all
together.

48. EOQ Model
EOQ Model : a company focuses on the
decision regarding how much quantity of
inventory should be ordered and when the
order should be placed.
In this technique, the stock of inventory is
re-ordered when it reaches the minimum
ordering level. This inventory management
technique saves the carrying and ordering
cost incurred while placing the order.

49. Zero Working Capital Approach
All times the current
assets shall equal the
current liabilities.
Excess investment in
current assets is avoided
and firm meets its current
liabilities out of the
matching current assets.
As current ratio is 1 and
the quick ratio below 1,
Interest costs are saved.

50. Zero Working Capital Approach
The firm saves opportunity cost on excess investments in current assets
and as bank cash credit limits are linked to the inventory levels, interest
costs are also saved.
Zero working capital also ensure a smooth and uninterrupted working
capital cycle, and it would pressure the Finance Managers to improve
the quality of the current assets at all times, to keep them 100%
realizable.

51. Net Working Capital: SRF LTD
TCF Business
CHIPS 4 362 1,52,250 152 5,50,60,274
INVENTORY Days Qty MT Price/MT per kg Value
CAPROLACTUM : RAW MATERIAL 30 2700 1,29,000 129 34,83,00,000
ACCOUNTS RECEIVABLE 30 1915 3,37,500 64,63,35,616
CURRENT ASSETS 1,58,99,77,397
SEMI FINISHED YARN 2 180 2,40,000 240 4,32,00,000
FINISHED YARN 7 186 2,40,000 240 4,46,46,575
FABRIC : FINISHED GOODS 21 1341 3,37,500 338 45,24,34,932
64 94,36,41,781
ACCOUNTS PAYABLE 21 1890 1,29,000 24,38,10,000
NET WORKING CAPITAL 1,34,61,67,397
CURRENT RATIO 6.52

52. Net working capital
ACCOUNTS RECEIVABLE 15 958 3,37,500 32,31,67,808
CURRENT ASSETS 72,91,50,000
INVENTORY Days Qty Price kg Value
CAPROLACTUM 15 1350 1,29,000 129 17,41,50,000
CHIPS 2 181 1,52,250 152 2,75,30,137
SEMI FINISHED YARN 1 90 2,40,000 240 2,16,00,000
FINISHED YARN 5 133 2,40,000 240 3,18,90,411
FABRIC 7 447 3,37,500 338 15,08,11,644
30 40,59,82,192
ACCOUNTS PAYABLE 40 3600 1,29,000 46,44,00,000
NET WORKING CAPITAL 26,47,50,000
CURRENT RATIO 1.57

53. Cash Management System by
Banks
It ensure effective
management of collections
and payments resulting in
improved cash flow and
effective liquidity
management
Effective control over funds Cash Concentration:
This is a quick and cost-effective method of moving funds
from different accounts spread across the country to a single
monitored and managed account. This allows businesses to
maximize the use of available cash, and to optimize returns
on consolidated balances

54. Cash Management System by
Banks
Reducing interest cost
Indian Corporates having
geographical presence can
pool everything at their Head
Office to offset the debits with
the surplus monies collected
from various locations
Efficient access to cash
through Centralized Fund
availability

55. Cash Management System by
Banks
It ensure effective management of
collections and payments resulting in
improved cash flow and effective
liquidity management
Effective control over funds Cash Concentration:
This is a quick and cost-effective
method of moving fundsfrom
different accounts spread across the
country to a single monitored and
managed account. This allows
businesses to maximize the use of
available cash, and to optimize
returns on consolidated balances
Reducing interest cost
Indian Corporates having geographical
presence can pool everything at their
Head Office to offset the debits with
the surplus monies collected from
various locations
Efficient access to cash through
Centralized Fund availability

56. RECEIVABLE MANAGEMENT
e-Invoicing
e-
payments

57. RECEIVABLE MANAGEMENT
A sale is realized as and when the
invoice is generated but usually, a time
period is provided to the customers for
the payment of the amount due.
This practice of conducting business on
credit terms give rise to Accounts
Receivable (AR) in the financial
statements.

58. RECEIVABLE MANAGEMENT
This credit facility is laid down
to ensure a smooth flow of the
working capital into the
businesses. There are
complexities involved with the
accounts receivable i.e its
management, the process of
recording in financial
statements, credit period etc.

59. What is factoring?
Factoring is a financial option for the
management of receivables.
It is a tool to obtain quick access to short-
term financing and mitigate risks related
to payment delays and defaults by buyers.
In the process of factoring, the seller sells
its receivables to a financial institution
(“Factor”) at a discount.

60. What is factoring?
After the sale, there is an immediate transfer of
ownership of the receivables to the factor.
In the due course of time, either the factor or
the company, depending upon the type of
factoring, collects payments from the debtors.
Factoring helps the company to improve the
cash flows and cover the credit risk of the
company

61. QUIZ

62. 1
Working capital management is a business strategy designed to ensure that a company
operates efficiently by monitoring and using its ……………….to the best effect.
A. current assets and liabilities
B. Day to day expense
C. Non current assets & non current liabilities
D. None of the above

63. 2
Working capital is a financial metric which represents operating liquidity available to a
business entity along with fixed assets such as plant and equipment, working capital is
considered a part of ……
A. operating capital
B. finance capital
C. working capital
D. net current asset management

64. 3
Efficient management of working capital in an important prerequisite for the successful working of a business
concern it reduces the chances of business failure generates a feeling of security and confidence in the minds of
personnel in the organization it assures …………….. of organization.
A. Solvency
B. Improved Liquidity
C. Increased profits
D. Operational efficiency
E. All the above

65. 4
Which of the following is studied with the help of operating leverage ?
A. Analysis of business risk
B. Analysis of financial risk
C. Analysis of production risk
D. Analysis of credit risk

66. 5
•What is the difference between the current ratio and the quick ratio?
A. The current ratio includes inventories and the quick ratio does not.
B. The current ratio does not include inventories and the quick ratio does.
C. The current ratio includes physical capital and the quick ratio does not.
D. The current ratio does not include physical capital and the quick ratio does.

70. Nylon Tyre Cord Fabrics (NTCF) are used as
reinforcements in tyres to give them strength and
durability. They provide shape to the tyres and
support the weight of the vehicle. They are
designed to keep tyres running longer and have
significant effect on the performance of the tyres.

71. INVENTORY MAINTAINED AT
MALANPUR PLANT 75 DAYS
Days Qty Price Value
CAPROLACTUM 30 2700 1,29,000 34,83,00,000
CHIPS 7 633 1,52,250 9,63,55,479
SEMI FINISHED YARN 2 180 2,40,000 4,32,00,000
FINISHED YARN 15 399 2,40,000 9,56,71,233
FABRIC 21 1,341 3,37,500 45,24,34,932
75 1,03,59,61,644

72. INVENTORY WAS REDUCED TO
50 DAYS Days Qty Price Value
CAPROLACTUM 21 1890 1,29,000 24,38,10,000
CHIPS 5 452 1,52,250 6,88,25,342
SEMI FINISHED YARN 2 180 2,40,000 4,32,00,000
FINISHED YARN 7 186 2,40,000 4,46,46,575
FABRIC 15 958 3,37,500 32,31,67,808
50 72,36,49,726
REDUCTION INTEREST ON WORKING CAPITAL LOAN WAS RS 3.75 CRORES

73. Used 140 MTPD Nylon 6 Polymer Chip Plant built in 1999. Designed to
make polymer in cylindrical chip form byreacting caprolactam in VK
tube reactors. Caprolactam is polymerized under elevated temperature
andmoderate pressure, under the strict exclusion ofoxygen andin
presence of water toa high viscous melt. The plant includes two(2)
production lines with capacity of100 MTPD and40 MTPD,respectively.
Each line includes 6 majorprocess sections: lactam / additive preparation
anddosing, continuous polymerization, chip production, continuous
extraction, continuous drying and extract water evaporation.

74. Polymerisation:
Nylon is made by polymerisation of caprolactam with certain additives like
amino acids and dicarboxylic acid salts and certain heat stabiliser such as
copper based organic compounds. The polymerisation process involves ring
opening polycondensation and polyaddition reactions. All the three polymerisation
reaction steps are equilibrium reactions.
A typical process of polymerisation of nylon can be either a batch or a
continuous process. The continuous process, developed after the batch process
was commercialised, offers simplicity of design, ease of operation and control
and high capacity.

75. An optimal polymerisation process would involve two stages, wherein, the first
stage involves pressure at high initial water concentration. In the second stage
a rapid transition from high water content to a low water content is achieved
by release of pressure and subsequent application of vacuum.
Industrial grade nylon-6 with relative viscosity 3.2 to 3.5 has higher degree of
polymerisation compared to textile grade nylon-6 with relative viscosity 2.2 to
2.6.

76. Extrusion and Drying of Chips:
The nylon chips are washed to remove water soluble impurities and then dried.
The process maybe batch or continuous.

77. Melt Spinning:
The polymer chips are melt in extruder. The molten polymer is then spun
through a spinnerette. The molten filaments are quenched or cooled by a
laminar flow of air.
The spin finish is applied on filament and then wound on spin bobbins and
drawn to make tyre yarns.
In the conventional process, the spinning and drawing was done in two steps.
In the spin-draw process, a step is reduced compared to 2-step conventional
process. As a consequence, some sources of process disturbances are eliminated
which results in improved yarn uniformity.

78. Preparation of Cord:
Nylon tyre yarns are then twisted in S or Z direction and plied having 2 or 3 plies
to form a tyre cord.

79. Recovery of Nylon-6 Waste:
Depending on the quality of waste, any of the following method may be used
for recycling of nylon waste.
Direct use of fibre waste
Regrannulation- i) without melting
ii) with melting.
Polymer Powder- i) deploymerisationandfilteration
ii) precipitation from solutions
Recovery of caprolactam by deploymerisatio

80. Raw Materials, (Catalysts, Additives, Spin Finish Etc.):
For nylon-6, the only major raw material required is caprolactam. Water is
required as an initiator for ring opening during polymerisation. Nitrogen gas
is required for blanketing, drying and conveying of polymer.