PRESENTATION BY

BIKRAMJEET SINGH

ON

STUDY ON WORKING CAPITAL

MANAGEMENT ON IFFCO-
PHULPUR UNIT
 INTRODUCTION
• ORIGIN OF IFFCO
• Till mid sixties cooperatives in India had no production facility despite
marketing nearly 70% of fertilisers.
• IFFCO was established as the farmers’ own initiative in Cooperative
Sector on 3rd Nov.’67 under the Multiunit Co-operative Societies Act
1942
• With the enactment of Multi State Co-Operative Societies Act in 1984
and 2002,the Society is deemed to be registered as a Multi State Co-
operative Society
• IFFCO -IN BRIEF
• Only Fertiliser Institution in the country to have surpassed 60 lakh MT
per annum in terms of sales
• Contributed about 20% to the total ‘N’ and 24% to the total “P2O5”
produced in the country during the year 2006-07
• Fertilisers marketed through more than 37300Cooperative Societies
and 165 Farmers Service Centers
• Service to the Farmers through a variety of programmes
• IFFCO
• (AS ON 31/03/2007)
• Largest producer of fertilisers in the country
• No. of Plant Locations :Four
• Installed Annual Capacity
• § UREA - 36.89 Lakh MT
• § NPK/DAP - 21.91 Lakh MT
• § TOTAL ‘N’- 20.16 Lakh MT
• § TOTAL ‘P2O5’- 8.25 Lakh MT
 HIGHLIGHTS
• HIGHLIGHTS OF 2006-07
• Production of Fertilisers 57.01 lakh MT
• (Best 60.47 lakh MT in 2005 -06)
• Production of Urea 36.01 lakh MT
• (Best 36.85 lakh MT in 2005 -06)
• Production of NPK/ DAP 21.00 lakh MT
• (Best 23.62 lakh MT in 2005 -06)
• Highest Sale of Urea 37.02 lakh MT
• (Previous Best 36.72 lakh MT in 2005 -06)
• Highest Sales of NPK/ DAP 23.52 lakh MT
• (Previous Best 23.39 lakh MT in 2005 -06)
• Highest Sales of Urea & NPK/ DAP 60.53 lakh MT
• (Previous Best 60.11 lakh MT in 2005 -06)
• Rs. 329.67 Crore
• (Best Rs. 557.21 crore in 2005 -06)
• Turnover Rs. 5919.57 Crore
• (Previous Best Rs. 6091.14 crore in 2005 -06)
 PROBLEM UNDERTAKEN
INTRODUCTION TO THE PROBLEM
• The industry which has rendered the greatest service to mankind returning the
original fertility to exhausted soils after the centuries of cropping is doubtless
the Chemical Fertilizer Industry.
• Fertilizers are only one of the important inputs needed to achieve the
maximum yield but since they remove all the restrictions on the supply of
plant nutrients, they are he most important.
• Fertilizers, and hence the Fertilizer industry constitutes one of the most
important key to World food supplies. The responsibility of the government
for the producing, distributing & promoting of the use of fertilizers is growing
rapidly, particularly in developing countries.
• For meeting this vital responsibility & to provide food to the 90 crore odd
population, the government has initiated the setting up of new fertilizer units
& expanding the production capacity of existing ones. Although other
Fertilizer industries, IFFCO is contributing a large to this national objective by
undertaking expansion of its existing plants.
• In the highly capital intensive fertilizer industry & under the growing
competitive scenario, evaluation of the economics of any unit is imperative.
An in depth study of the WORKING CAPITAL MANAGEMENT helps in
evaluating the economics and feasibility besides assessing the production cost
effectiveness of a unit.
 RESEARCH OBJECTIVE
RESEARCH OBJECTIVE
• This project report aims to study the importance of
WORKING CAPITAL MANAGEMENT in IFFCO
Phulpur unit and this broad aim is divided into the
following objectives:
• To study the importance of Working Capital Management
in any organization.
• To find out the Working Capital in IFFCO for 2006-07 and
compare it with WC for 2005 -06.
• To study the sources and usage of funds in Working
Capital Management.
• To study the importance of cash management and cash
budget.
• To study the receivables and inventory management.
 CONCEPTS AND DEFINITIONS OF
WORKING CAPITAL
• There are 2 concepts of working capital: gross
and net.
• Gross working capital: It also referred to
working capital, means the total current assets.
• Net working capital: It can be defined in two
ways:
• The most common definition of NWC is the
difference between current assets and current
liabilities;
• Alternate definition of NWC is that portion of
current assets which is financed with long-term
funds.
 INGREDIENTS OF WORKING CAPITAL
MANAGEMENT
• TRADE OFF BETWEEN PROBABILITY AND RISK
• DETERMINIG FINANCING MIX
• WORKING CAPITAL TREND AT IFFCO (2006-07)
• Current assets (A) As on 31.3.2007 As on 31.3.2006
• Inventories 102056.05 113752.53
• Sundry Debtors 46946.10 46127.70
• Cash & bank balances 11339.45 22213.10
• Loans & advances 96060.45 85348.20
• _________ ____________
• Total 256402.05 267441.53
• _______________________
• Current liabilities & provisions (B)
• Sundry creditors 62842.35 71816.48
• Other liabilities 10684.60 6611.30
• Interest on loans 323.17 786.41
• Earnest money/security 1162.34 1090.27
• Deposits
• Advances from customers 706.92 1132.19
• PROVISIONS:
• Taxation (net of advance -- 4773.27
• income tax)
• Proposed dividend 8015.89 8632.69
• Leave encashment 5428.16 4752.85
• Gratuity -- 1109.04
• Cooperative education fund 1080.34 927.94
• ________ _________
• Total 90243.77 101632.4
• _________ __________
• WORKING CAPITAL 166158.28 165809.09
• (A-B)
• Working capital analysis for 2006-07:
• As on 31.3.2006 as on 31.3.2007
Increase/decrease
• NWC 165809.09 166158.28
+349.19
• Net working capital has been improved by increase of Rs. 349.19, which is an
increase of 0.21%. (349/165809.09 * 100 = 0.21%).
• Major cause of increase in NWC level:
• 1. Increase in investment level:
• As on 31.3.2006 As on 31.3.2007
Increase/decrease
• Raw material 22783.14 27954.89 +5171.75
• Loans & advances 85348.20 96060.45 +10712.25
•
________________________________________________
• Total 108131.34 124015.45
+15884
•
_________________________________________________
• Decrease in advances received & other liabilities
• As on 31.3.2006 As on 31.3.2007 Increase/decrease
• Sundry creditors 71816.48 62842.35
-8974.13
• Interest on loans 786.41 323.17 -
463.24
• Advances from 1132.19 706.92
-425.27
• Customers
• Provisions 20195.79 14524.39
-5671.4
•
___________________________________________________
• Total 93930.87 78396.83
-15534.04
•
____________________________________________________
 FINDINGS OF THE STUDY
• Working capital in IFFCO shows an
increasing trend from year 2005 -06 to year
2006-07.
• This increase is found to be only to the
extent of 0.21%.
• Working capital financing in IFFCO found
to be through Letter of Credit, Letter of
Guarantee and Term loans.
• Current ratio and quick ratio shows an
increasing trend over the last five years.
 RECOMMENDATIONS
• Since the increase in Working capital found
to be only 0.21%, so it should be increased
during next few years.
• There should not be any expansion plans in
the company at least for 2 years.
• Sources of financing should be increased.
THANK YOU