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A A Comparitive AnalysisComparitive Analysis
Of Of Working Capital Working Capital
Of Of
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STATEMENT OF PURPOSE :
The purpose behind this report is to compare the working capital of
Dabur with various other leading FMCG Companies.
OBJECTIVES :
This project have been undertaken with the following objectives :-
To determine the various sources of working capital and financing
available to Dabur India Ltd.
To determine the liquidity position of Dabur India Ltd. amongst the
debtors, creditors, share holders etc.
To make comparative study with few leading FMCG companies like HLL,Nestle & Cadbury.
PLACE OF RESEARCH :
The place of research in this project is limited to Dabur India Ltd.
Sahibabad, Ghaziabad (U.P.).
EXECUTIVE SUMMARYEXECUTIVE SUMMARY
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RESEARCH METHODLOGY USEDRESEARCH METHODLOGY USED
The data source for this project has basically been the
secondary data taken from following data sources :-
Annual Report of Dabur
Annual Report of Nestle
Annual Report of HLL
Internet
TIME FRAME :
The duration of this project was approximately 4 to 5
weeks.
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OVER 100 YEARS OF CARINGOVER 100 YEARS OF CARING Dabur commenced operations in 1884 and is today a multi-
locational, multi ± product enterprise. The company has
major interests in hewalth and beauty care.
Dabur is a leader in Ayurveda ± the traditional Indian
health care system.
The company manufactures and markets a range of
oncologicals. Dabur is one of the companies in the worldto produce PACLITAXEL ± AN ANTI CANCER DRUG. The
company has developed its own eco-friendly process to
manufacture this drug from raw material stage.
The company has 12 manufacturing plants in India, Nepal
and Egypt. Dabur products are also manufactured inDubai.
Dabur has a transactional network of 19 offices servicing
both rural and urban markets in India.
The company has sales and marketing offices in Dubai and
London. Dabur products are available in over 50 countries.
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INTRODUCTION TOINTRODUCTION TO
WORKING CAPITALWORKING CAPITAL The term working capital refers to the capital required for day to day
operations of a business enterprise. It is represented by excess of current assets over current liabilities. It is necessary for anyorganisaton to run successfully its affairs,to provide for adequateworking capital. Too large an investment in current assets meansblocking the capital that can be used productively elsewhere.on theother hand, too little investment can also be expensive. For example,insufficient inventory may cause loss of sales to customer.
There are basically two concepts of working capital- gross and net.
Gross Working Capital :
This refers to the firm¶s investment in current assets. Current assetsare the assets which can be converted into cash within an accountingyear(or operating cycle) and include cash, debtors(accountsreceivable or book debts), bills receivable and stock(inventory).
Net Working Capital : It refers to the difference between net current assets and current
liabilities. Current liabilities are those claims of outsiders which areexpected to mature for payment within an accounting year. Networking capital can be positive or negative.
A positive net working capital will arise when current assets exceedcurrent liabilities. A negative net working capital occurs when current
liabilities are in excess of current assets.
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SOURCES OF WORKINGSOURCES OF WORKING
CAPITALCAPITAL Dabur India Limited as a successful company in FMCG sector has the
following sources available for the fulfillment of its working capitalcapital requirements in order to carry onS its operations smoothly.
BANKS
These include the following banks :
Punjab national bank
Standard Chartered Bank Ltd Hong Kong andShanGhai Banking Corpn Ltd
State Bank of India
HDFC Bank Ltd
IDBI Bank Ltd
Citibank
COMMERCIAL PAPERS Commercial Papers have become an important tool for financing theworking capital requirements of a company.
Commercial Paper is an unsecured promissory note issued by thecompany to raise short-term funds . The buyers of Commercial Papersinclude banks,insurance companies,unit trusts and companies withsurplus funds to invest for a short period with minimum risk.
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BALANCE SHEET OF DABUR INDIA LTD.
AS AT MARCH 31, 2004
(ALL AMOUNTS IN LACS)
SCHEDULE AS ON 31st MARCH 2004
SOURCES OF FUNDS :
SHARE HOLDER¶S FUNDS:
A) SHARE CAPITAL A 2862.49
24003.32
B) RESERVES & SURPLUS B 26865.81
LOAN FUNDS: A) SECURED LOANS C 1909.37
2071.91 3981.28
DEFFERED TAX LIABILITY EB 796.95
TOTAL 31644.04
APPLICATION OF FUNDS:
FIXED ASSETS:GROSS BLOCK F 27450.18
B) LESS: DEPRECIATION 11955.85
NET BLOCK 15494.33
INVESTMENTS G 17122 .67
DEFFERED TAX ASSETS EB 57.01
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CURRENT ASSETS, LOANS
& ADVANCES:
INVENTORIES 11149.78
SUNDRY DEBTORS 4207.22
CASH & BANK BALANCES 1188.72LOANS & ADVANCES 5386.49
21932.21
LESS : CURRENT LIABILITIES EA
& PROVISIONS
A)LIABILITIES 16452.07
B)PROVISIONS 7169.81
23621.88
NET CURRENT ASSETS (1689.70)
MISCELLANEOUS IA 659.70
EXPENDITURE
(to the extent not written off or
adjusted)
TOTAL 31644.04
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COMPARISON OF W ORKING CAPITAL (R s. C rores)
COMPANY DATE CURRENT
ASSETS
CURRENT
LIABILITIES
W ORKING
CAPITAL
DABUR 31-03-04 219.32 236 .21 (16 .8 9 )
31-03-03 406 .11 212 .24 193.87
H LL 31-12-03 3878.88 398 0 .25 (101.37)
31-12-02 38 18.38 3788.2 8 30 .10
CADBURY 31-12-03 217.6 135 .26 8 2 .34
31-12-02 26 8.54 137.77 130 .77
NESTLE 31-12-03 412 .39 551.24 (138.8 5 )
31-12-02 406 .91 48 1.29 ( 7 4.38)
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Comparitive AnalysisComparitive Analysis
Current Ratio
This ratio shows the extent of working capital
available. It also shows the relationship between
current assets.
The following table shows the current ratio for
Dabur and few other leading FMCG Company :-
Liquidity Analysis
Dabur
(2003-04)
HLL
(2002-03)
Cadbury
(2002-03)
Nestle
(2002-03)
Current
Ratio1.41% 1.27% 2.41% 0.88%
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Debt-Equity Ratio
This ratio indicates the relationship betweenDebt and Equity.
The following table shows the Debt-Equity ratios
for Dabur and few other FMCG companies :-
Dabur
(2003-04)
HLL
(2002-03)
Cadbury
(2002-03)
Nestle
(2002-03)
Debt-Equity
Ratio
0.10% 0.62% 0.01% 0.00%
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304 01
235 32261 28
112 30
81 60
-16 90
-50
0
50
100
150
200
250
300
350
N RK N C N
Rs CR R
R
N RK N C
Series1 304.01 235.32 261.28
Series2 112.30 -16.90
Series3 81.60
1999-00 2000-01 2001-02 2002-03 2003-04
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Profitability Analysis
ROCE This is the companies Return On Capital
Employed, which shows the relationshipbetween profit earn by the company and its
capital employed. The following table shows the ROCE ratios for
Dabur and few other leading FMCG companies:-
Dabur
(2003-04)
HLL
(2002-03)
Cadbury
(2002-03)
Nestle
(2002-03)
ROCE Ratio 34.90% 49.00% 21.85% 78.00%
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1 4.30
1 8 .7 0
1 4 .5 0
2 7 .2 0
3 4 .9 0
0 . 0 0
5 . 0 0
1 0 . 0 0
1 5 . 0 0
2 0 . 0 0
2 5 . 0 0
3 0 . 0 0
3 5 . 0 0
R O C E ( % )
Y E A R S
RETURN ON CA PITAL EM PLOYED
Ser i es1 1 4. 30 1 8. 70 1 4. 50
Ser i es2 27. 20 34. 90
1 999-00 2000-01 2001 -02 2002-03 2003- 04
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RONW
Which is known as the Return On Networth. Its states the profit earned by the company on
share holders funds.
The following table gives the ratio of RONW for
Dabur and few other leading FMCG companies :-
Dabur
(2003-04)
HLL
(2002-03)
Cadbury
(2002-03)
Nestle
(2002-03)
RONW Ratio 38.60% 83.18% 12.81% 78.53%
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24 7022 00
16 20
32 30
38 60
0.00
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
R N N
R
R URN N N R H
Series1 24.70 22.00 16.20
Series2 32.30 38.60
1999-00 2000-01 2001-02 2002-03 2003-04
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77. 43 77. 92
6 4 .4 4
7 2 .0 0
1 3.1 0
1 01 .20
0
2 0
4 0
6 0
8 0
1 0 0
1 2 0
P A T ( I N R s .
C R O R E S )
Y E A R S
PA T
Ser i es1 77. 43 77. 92 64. 44
Ser i es2 72. 00 1 01 . 20
Ser i es3 1 3.1 0
1 999-00 2000-01 2001 -02 2002-03 2003-04
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ConclusionConclusion
The project report reveals Dabur¶s Working
Capital position for the past few years.
On the basis of the liquidity analysis the liquidity
position of Dabur as compared to few other leading FMCG companies is not good enough to
cover its short term and long term liabilities.
As seen in the balance sheet for 2003-04 the
working capital status of Dabur is negative,which might not be favourable in terms of its
position amongst it creditors.
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Dabur should improve on its liquidity
position to cover its liabilities. On the basis of the analysis done the
company has good future prospects inthe concerned industry, as it is
increasing its profits gradually. Thus, Dabur contributes in a colossal
way in terms of providing goods, servingthe society & maintaining the
enviornment.