Transcript www.pkmadvisory.com

Working Capital Management
Case Study – Textile spinning
PRESENTED BY :
CA – PRADIP MODI
Member Advisory Board,
PKM ADVISORY SERVICES PVT. LTD.
AHMEDABAD
MOBILE : 9824014310, Phone : +91 79 4006 5204
FINANCING OF AN ENTERPRISE
BUSINESS ACTIVITY
– Trading
– Manufacturing – Green Field – Expansion – Diversification
FINANCING PATTERN
Trading
– Short Term – Annual basis – Working Capital
Manufacturing
– Long Term – 5 to 7 years – Term Loan
Short Term
– Annual basis – working capital
Working Capital
– Fund Based
Non fund based – letter of credit – guarantee
Term Loan
– Rupee Loan
– Foreign Currency – ECB
– Debentures
– Private Equity
SOURCES OF FINANCING
Banks
Financial Institutions
Non Banking Financing Companies
HISTORY OF BANKING IN INDIA
Reserve Bank of India commenced operation from April, 1, 1935.
Through Reserve Bank of India Act, 1934 (II of 1934)
1949 – Enactment of Banking Regulation Act.
RESERVE BANK OF INDIA played a special role in the context of Development
Instrumental in setting up Development Institutions
Setup Institutions to build the financial infrastructure
Deposit Insurance and credit guarantee corporation of India
Unit Trust of India
The Industrial Development Bank of India (IDBI)
The National Bank of Agricultural and Rural Development (NABARD)
The Discount & Finance house of India.
PHASE I
General Bank of India – 1786
Bank of Bengal – 1809
Bank of Bombay – 1840
Bank of Madras – 1843
Established by The East India Company,
Merged into imperial bank in 1920.
1865 onwards banks were established exclusively by indians.
PHASE II
Banking Sector Reforms
Imperial Bank was nationalised in 1955 – State Bank of India was formed
Seven Banks forming subsidiaries of State Bank of India were nationalised in 1960.
14 Major commercial banks were nationalised on 19th July 1969.
PHASE – III
1991– Indian economy opened up
Liberalisation of banking practices
Continuing Government control with public participation.
BANKING INDUSTRY
in retrospect.
1) PRE-NATIONALISATION (private ownership)
Prior to 1969, focus more on individual credibility of borrower rather
than huge paper work. Setbacks were largely absorbed by corporate
houses who owned them.
2) POST NATIONALISATION
Pre – supposed social objectives with specific mandate to banks;
i)
To expand branch network – mostly in rural India.
Flow of credit to rural and SSI sector – Approach at times that
banking industry should sacrifice, if required in
achieving social
goal (not scientifically defined) – known as Loan
Mela.
ii)
3) POST – LIBERALISATION (Precisely 1990 onwards)
Economy to global competition. Focus shifted to better risk
management and improving quality of assets. More transparent system
to reflect true financial position of banks.
Systematic efforts initiated first time in 1991 for performance
evaluation of the borrower and lenders.
Committee under the Chairmanship of Mr. M. Narsimham –
1)
To study prevailing financial system,
2)
To identify shortcomings and weakness
3)
To prescribe norms to make the disclosure practices
more transparent and meaningful.
Report tabled in parliament on 17.12.1991.
RECOMMENDATIONS
PRUDENT ACCOUNTING NORMS FOR INCOME RECOGNITION
To make if more objective based on record and recovery
rather than subjective considerations like availability of
security, net worth of borrower and guarantors (even though,
importance given on security and net worth as banking
system requires).
BANKING – WORKING CAPITAL LENDING PROCEDURE
Prior to Tondon / Chore Committee Recommendations
Through credit authorisation system – centralised
Branch Office – Regional office – Zonal office – Head Office – RBI – CAS
Queries – RBI – Head Office – Zonal Office – Regional Office – Branch office
COMMITTEE RECOMMENDATION – DECENTRALISED
Methodology
Norms of Current assets in major industries
End – use criteria
Maximum Permissible Bank Finance
Emphasis on loan systems
Periodic Information and reporting system
CREDIT MONITORING ARRANGEMENT (CMA)
STRUCTURE
PROFITABILITY PROJECTIONS – OPERATING STATEMENT
I)
Past two years’ – Audited.
II)
Current year – estimated
III)
Next year – projected
BALANCE SHEET ANALYSIS
A.
ii)
I)
Current liabilities
a)
Bank Borrowing – Working Capital limit.
b)
Current liability – payable within one year
c)
Total current liabilities – (a) + (b)
Long Term Liabilities – Payable after one year
a)
Total outside liabilities
iii)
Net worth
Equity + Reserves & Surplus.
iv)
TOTAL
B.
I)
Current Assets – Assets realisable within one year
ii)
Deferred current assets – more than one year.
iii)
Gross Fixed assets – Depreciation = Net fixed assets
iv)
TOTAL
WORKING CAPITAL – DEFINITION
The funds which are used to manage day to day business operations
Current Assets – Current Liabilities
CURRENT ASSETS

Inventory
- Raw materials
- Work in progress
- Finished goods
- Stores, spares, Packing material

Receivables

Cash & Bank Balance
CURRENT LIABILITEIS

Trade Creditors

Expenses – Provisions – Payable within one years
Assessed on an annual basis
Assets conversion cycle through operations
ASSESSMENT OF WORKING CAPITAL
Maximum Permissible Bank Finance (MPBF)
Tondon Committee Recommendations
Method – I
Promoters 25% of net working capital
(Current Assets – Current Liabilities)
Method – II
Promoters 25% current assets
Method – III
100% of hard core assets + 25% of other current assets
Chore Committee discarded method III and recommended Method II
Method II Known as MPBF
Working Capital Gap Method
Method - I
Method - II
1000
1000
1)
Current assets
2)
Current Liabilities (Excluding bank)
400
400
3)
Working Capital gap
600
600
4)
Minimum Stipulated - Net working capital
150
250
(25% of No.3)
(25% of No.1)
450
350
(3-4)
(3-4)
5)
Bank finance
CMA - DATA
FORM – I
Particulars of Existing and Proposed Limits
FORM – II
Operating Statement
FORM – III
Analysis of Balance Sheet
FORM – IV
Comparative Statement of Current assets & Current Liabilities
FORM – V
Computation of Maximum Permissible Bank Finance (MPBF)
FORM –IV
Funds Flow Statement
PROJECT APPRAISAL
Till the year 2000
Project Funding was done by Financial Institutions
1)
2)
3)
4)
5)
State Financial Corporations.
Industrial Development Bank of India (IDBI).
Industrial Finance Corporation of India (IFCI)
Industrial Credit and Investment Corporation of India
Small Industrial Development Bank of India (SIDBI).
(ICICI).
Working capital provided by commercial banks.
Funding pattern is changed.
IDBI & ICICI transformed into full fledged banking
Commercial Banks provide both Term Loans and Working Capital.
PROJECT APPRAISAL
A process to assess various aspects for arriving at a financing decision.
1)
Managerial Competence
– Resourcefulness, competence
and integrity of the management.
2)
Technical Feasibility
3)
Commercial Feasibility
– Appropriate Technology to maintain
quality and cost competitiveness.
Availability of skilled management
team
– Detailed market survey – both desk
and field survey.
4)
Financial Feasibility
i)
Cost of production & Projected
profitability.
ii) Balance Sheet and Cash flow
statement.
iii) Financial ratios – Term Loan
Working capital
- Short term funds are not diverted to
finance long term assets.
- Availability of raw material, power and
labour.
FINANCIAL RATIOS AND PARAMETERS
SHORT TERM VIABILITY
LONG TERM VIABILITY
PROFITABILITY
 Gross profit to sales
 Net profit to sales
 Raw Materials to sales
 Interest to sales
 Interest Coverage ratio
PROFITABILITY
 Gross profit to sales
 Operating profit to sales
 Net profit to sales
 Cash accruals
 DSCR – Debt service coverage ratio
 Break even Analysis
 Sensitivity Analysis
 Internal rate of return
BALANCE SHEET
 Current ratio
 Total Outside Liability to
Tangible net worth
 Term Liability to Tangible net worth
 Stock turnover ratio
 Receivable Turnover ratio
BALANCE SHEET
 Current ratio
 TOL to Tangible Net worth
 Term Liability to Tangible Net worth
Implication of each ratios
1) Current ratios
Current assets are sufficient to service current liabilities 1.33:1.
2) TOL to TNW
Total outside liabilities against tangible net worth are
not out of proportion – Maximum 3 to 4 times
3) DSCR
Cash accruals are sufficient to service interest on Term
Loan and Term Loan – Minimum 1.75 times
4) Break Even Analysis
Capacity utilisation & Turnover at a level where both
variable and fixed expenses are absorbed
– No profit – No loss.
5) Sensitivity Analysis
Profitability level, cash accruals and DSCR
i)
At a level when sales price is lower in actual than
assumed.
ii) At a level when raw material price is higher in
actual than assumed.
iii) At a level when production is lower in actual than
assumed.
6) Interest coverage ratio
Profit before interest divided by interest.
How many times, profit covers interest
7) Stock & receivable
Turnover ratio
How many time stocks and Receivables are routed
against assumed sales
Project Viability
PROMOTERS’ Point of view
1) Proper use of technology
2) Monitoring Cost control
Technical Skilled Manpower
Appropriate process flow-control – Reduce wastages
Financial discipline – Judicious use of finance
Inventory control
3) Marketing – Keep check on competition – Domestic / Global
BANKERS – institution point of view
SHORT TERM
Control on Receivables – Current assets
No diversion of working capital for long term assets
Proper implementation of process flow chart
Production planning
LONG TERM
Cash accruals as planned to service debt
Proper knowledge on sensitivity
Break – even planning
Control of stock in process
Yarn production cycle – 7 days
Day
Process Stock
Overheads
1st
0
0
2nd
110
5
3rd
225
5
4th
340
5
5th
455
5
6th
570
5
7th
685
5
Raw material
Overhead
0
100
10
115
100
10
230
100
10
345
100
10
460
100
10
575
100
10
690
100
10
Stock in progress
110
110
110
225
110
340
110
455
110
570
110
685
110
800
Stock in progress
660
Finished goods
140
Selection of Product Mix
The product mix depends upon various factors.

Promoters’ Competency – experience – Market knowledge

Proper market survey – Marketing network

The selection of Machineries based on proposed product mix
Whether carded yarn only
carded and combed yarn

Financial Resourcefulness

Technical Manpower

Availability of Raw material
Case Study – Textiles – Spinning
TEXTILE - VALUE CHAIN
Manufacturing Process
Man made Filament
Fiber
Man-made Staple fibers
Natural Fibers (Cotton)
Cleaning
Texturizing
Blending
Carding
Drawing
Combing
Drawing
Drafting - inter
Spinning
Winding
Technical Parameters
LENGTH
Staple
Classification
Length MM
Length Inches
Product Mix Count
1)
Short
Less than 24
15/16-1
Coarse below 20s
2)
Medium
24-28
1.1/132-1.3/32
Medium Count 20s – 40s
3)
Long
28-34
1.3/32-1.3/8
Fine count 40s – 60 s count
4)
Extra long
34-40
1.3/8-1.9/16
Superfine count 80s – 140s
Co-relation between fiber and yarn.
1. Staple length
spinning potential
2. Fiber strength
Yarn strength, less breakages
3. Fineness
Finer spinning potential
4. Maturity
Yarn strength and evenness, better dyeing
absorbity
5. Trash (non-lint content) Reduce waste
6. Uniformity Ratio
Better productivity and evenness
7. Elongations
less end breakages
8. Friction
cohesiveness
9. Yellowness
Yarn appearance
10. Nepiness
Yarn nepiness
11. Moisture Content
8.5% moisture content optimum for spinning @
65%.
COST OF PROJECT
SPINNING - 17136 SPINDLES
1)
2)
MEANS OF FINANCE
Rs. Lacs
Equity Share Capital
227.50
Land & Site Development
Share Premium
455.00
Land is taken on lease - Site
development
Unsecured Loan
227.50
5.00
Term Loan
Buildings
1740.00
TOTAL
Factory Building
545.64
3)
Plant & Machineries
1541.01
4)
Engineering, Electrification &
humidification
5)
Maintenance workshop
6)
Material handling equipments
29.57
7)
Misc. Fixed assets, Computers, office
equipments
25.00
8)
Preliminary expenses
10.00
9)
Preoperative expenses @ 3%
68.71
10)
Provision for Contingencies @ 3%
68.71
11)
Interest during construction
12)
Margin money for working capital
164.66
9.55
153.20
TOTAL
28.95
2650.00
Promoters' Contribution
D.E.R
Assets coverage Ratio
2650.00
Production Calculation
7.22 x rpm
TPI X Count
1) 20s Carded
2) 24s Carded
3) 30s Carded
4) 40s Carded
TPI
= T.M X √Count
4.1 x 4.4722 = 18.335
= 265.803 gms per spindles shift
7.22 x 13500
18.335 x 20
97470
367
7.22 x 15000
20.086 x 24
4.1 x 4.899 = 20.086
108300 = 224.659 gms per spindles shift
482
7.22 x 17000
22.456 x 30
4.1 x 5.477 = 22.456
122740 = 182.193 gms per spindles shift
674
7.22 x 17000
25.931 x 40
4.1 x 6.324 = 25.931
122740 = 118.333 gms per spindles shift
1037
NO. OF MACHINES REQUIRED AT EACH STAGE
STAGE
Production
Production
No. of
per day kgs.
per day kgs.
Machines
per machine
require
Blow Room
12960
10327
1
Cards
1207
9811
9
Draw Frames
- Breaker
- Finished
single delivery
5112
9781
2
2716
9752
4
Inter
1708
9699
6
PRODUCTION AT EACH STAGE – RAW MATERIAL REQUIREMENT
Capacity Utilisation – 97%
efficiency 94%
Yarn Production
– Ring Frame – 9457 Kgs per day
Yarn Production
– Autoconor – 9362 Kgs per day – Final product for sale
Input
Output
Kgs. / Day
Kgs. / Day
Blow room
10871
10327
Carding
10327
9811
Drawing - 1
9811
9781
Drawing - 2
9781
9752
Inter
9752
9699
Ring Frame
9699
9457
Autoconor
9457
9362
Yield
86.12%
RAW MATERIAL REQUIRED PER DAY 10871 KGS.
Assumptions
1
2
3
4
5
6
For the year ending
31st March
No of days
No. of Shifts
No of Machines
20s Carded
24s Carded
30s Carded
40s Carded
Total Machines
Spindles per
machine
20s Carded
24s Carded
30s Carded
40s Carded
Total spindles
20s Carded
24s Carded
30s Carded
40s Carded
Total spindles
Capacity
Utilisation
2012
165
3
2013
330
3
2014
330
3
2015
330
3
2016
330
3
2017
330
3
2018
330
3
20
24
30
40
5
4
4
4
17
5
4
4
4
17
5
4
4
4
17
5
4
4
4
17
5
4
4
4
17
5
4
4
4
17
5
4
4
4
17
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
1008
Nos.
Nos.
Nos.
Nos.
Nos.
5040
4032
4032
4032
17136
5040
4032
4032
4032
17136
5040
4032
4032
4032
17136
5040
4032
4032
4032
17136
5040
4032
4032
4032
17136
5040
4032
4032
4032
17136
5040
4032
4032
4032
17136
92.00% 95.00% 97.00% 97.00% 97.00% 97.00% 97.00%
7
Spindles @ capacity
utilisations
20s Carded
24s Carded
30s Carded
40s Carded
RPM
20s Carded
24s Carded
30s Carded
40s Carded
9 TM
20s Carded
24s Carded
30s Carded
40s Carded
10 TPI
20s Carded
24s Carded
30s Carded
40s Carded
11 PRODUCTION
Gms. / spindle / shift
20s Carded
24s Carded
30s Carded
40s Carded
Nos.
Nos.
Nos.
Nos.
Nos.
2012 2013 2014 2015 2016 2017 2018
4637 4788 4889 4889 4889 4889 4889
3709 3830 3911 3911 3911 3911 3911
3709 3830 3911 3911 3911 3911 3911
3709 3830 3911 3911 3911 3911 3911
15765 16279 16622 16622 16622 16622 16622
8
Gms
Gms
Gms
Gms
13500
15000
17000
17000
13500
15000
17000
17000
13500
15000
17000
17000
13500
15000
17000
17000
13500
15000
17000
17000
13500
15000
17000
17000
13500
15000
17000
17000
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
4.10
18.336
20.086
22.457
25.931
18.336
20.086
22.457
25.931
18.336
20.086
22.457
25.931
18.336
20.086
22.457
25.931
18.336
20.086
22.457
25.931
18.336
20.086
22.457
25.931
18.336
20.086
22.457
25.931
266
225
182
118
266
225
182
118
266
225
182
118
266
225
182
118
266
225
182
118
266
225
182
118
266
225
182
118
2012
2013
2014
2015
2016
2017
2018
20s Carded
94%
94%
94%
94%
94%
94%
94%
24s Carded
94%
94%
94%
94%
94%
94%
94%
30s Carded
94%
94%
94%
94%
94%
94%
94%
40s Carded
94%
94%
94%
94%
94%
94%
94%
12 Efficiency
13 PRODUCTION
Gms. / spindle / shift
20s Carded
Gms
250
250
250
250
250
250
250
24s Carded
Gms
211
211
211
211
211
211
211
30s Carded
Gms
171
171
171
171
171
171
171
40s Carded
Gms
111
111
111
111
111
111
111
20s Carded
Kgs.
3475
3589
3664
3664
3664
3664
3664
24s Carded
Kgs.
2350
2427
2478
2478
2478
2478
2478
30s Carded
Kgs.
1906
1968
2009
2009
2009
2009
2009
40s Carded
Kgs.
1238
1278
1305
1305
1305
1305
1305
Kgs.
8969
9262
9457
9457
9457
9457
9457
14 PRODUCTION
Kgs. Per day
15 PRODUCTION
20s Carded
Kgs.
573447 1184293 1209226 1209226 1209226 1209226 1209226
24s Carded
Kgs.
387765
800820
817679
817679
817679
817679
817679
30s Carded
Kgs.
314457
649423
663095
663095
663095
663095
663095
40s Carded
Kgs.
204246
421813
430693
430693
430693
430693
430693
Kgs. 1479916 3056349 3120693 3120693 3120693 3120693 3120693
16 SELLING PRICE
20s Carded
24s Carded
30s Carded
40s Carded
SELLING PRICE
17
(WASTAGE)
20s Carded
24s Carded
30s Carded
40s Carded
18 WASTAGE
20s Carded
Yield
Invisible loss
Saleable waste
24s Carded
Yield
Invisible loss
Saleable waste
30s Carded
Yield
Invisible loss
Saleable waste
Rs. / Kg.
Rs. / Kg.
Rs. / Kg.
Rs. / Kg.
2012
140.00
150.00
165.00
180.00
2013
140.00
150.00
165.00
180.00
2014
140.00
150.00
165.00
180.00
2015
140.00
150.00
165.00
180.00
2016
140.00
150.00
165.00
180.00
2017
140.00
150.00
165.00
180.00
2018
140.00
150.00
165.00
180.00
Rs. / Kg.
Rs. / Kg.
Rs. / Kg.
Rs. / Kg.
30.00
35.00
40.00
45.00
30.00
35.00
40.00
45.00
30.00
35.00
40.00
45.00
30.00
35.00
40.00
45.00
30.00
35.00
40.00
45.00
30.00
35.00
40.00
45.00
30.00
35.00
40.00
45.00
86.12% 573447 1184293 1209226 1209226 1209226 1209226 1209226
1.00%
6659
13751
14041
14041
14041
14041
14041
12.88% 85744 177081 180809 180809 180809 180809 180809
100.00% 665850 1375125 1404075 1404075 1404075 1404075 1404075
86.12% 387765
1.00%
4502
12.88% 57980
100.00% 450248
800820
9299
119742
929861
817679
9494
122263
949437
817679
9494
122263
949437
817679
9494
122263
949437
817679
9494
122263
949437
817679
9494
122263
949437
86.12% 314457
1.00%
3651
12.88% 47019
100.00% 365128
649423
7541
97104
754068
663095
7699
99149
769943
663095
7699
99149
769943
663095
7699
99149
769943
663095
7699
99149
769943
663095
7699
99149
769943
40s Carded
Yield
Invisible loss
Saleable waste
86.12%
1.00%
12.88%
100.00%
2012
204246
2372
30540
237157
2013
421813
4898
63071
489782
2014
430693
5001
64399
500093
2015
430693
5001
64399
500093
2016
430693
5001
64399
500093
2017
430693
5001
64399
500093
2018
430693
5001
64399
500093
Raw Material requirement
20s Carded
24s Carded
30s Carded
40s Carded
Kgs.
Kgs.
Kgs.
Kgs.
665850 1375125 1404075 1404075 1404075 1404075 1404075
450248
929861
949437
949437
949437
949437
949437
365128
754068
769943
769943
769943
769943
769943
237157
489782
500093
500093
500093
500093
500093
Kgs. 1718383 3548835 3623548 3623548 3623548 3623548 3623548
19 RAW MATERIAL
COTTON FOR
20s Carded
(Rs./ Kgs.)
77.25
77.25
77.25
77.25
77.25
77.25
77.25
24s Carded
(Rs./ Kgs.)
77.25
77.25
77.25
77.25
77.25
77.25
77.25
30s Carded
(Rs./ Kgs.)
90.00
90.00
90.00
90.00
90.00
90.00
90.00
40s Carded
(Rs./ Kgs.)
90.00
90.00
90.00
90.00
90.00
90.00
90.00
1666
1666
1666
1666
1666
1666
1666
1666
20 Power
1666 x 96% x 76% x 24 x
days x Capacity
units 4428359 9145524 9338062 9338062 9338062 9338062 9338062
4.80
4.80
4.80
4.80
4.80
4.80
4.80
212.56
438.99
448.23
448.23
448.23
448.23
448.23
% of sales
% of sales
% of sales
% of sales
2012
1.00%
2.00%
1.50%
1.50%
2013
1.00%
2.00%
1.50%
1.50%
2014
1.00%
2.00%
1.50%
1.50%
2015
1.00%
2.00%
1.50%
1.50%
2016
1.00%
2.00%
1.50%
1.50%
2017
1.00%
2.00%
1.50%
1.50%
2018
1.00%
2.00%
1.50%
1.50%
- Building
% of bldg.
0.53%
0.53%
0.53%
0.53%
0.53%
0.53%
0.53%
- Plant & Machineries
% of P&M.
1.03%
1.03%
1.03%
1.03%
1.03%
1.03%
1.03%
26 Interest on term Loan
11.50%
21
22
23
24
Stores & Spares
Other manufacturing exps.
Administrative expensive
Marketing expenses
25 Repairs & Maintenance
Interest on Working Capital
12.50%
27 Spinning
Stock in process
days
7
7
7
7
7
7
7
Finished goods
days
25
25
25
25
25
25
25
Raw Material
days
50
60
60
60
60
60
60
Stores & Spares Stock
days
25
25
25
25
25
25
25
26
40
40
40
40
40
40
5%
10%
10%
10%
10%
10%
10%
days
7
10
10
10
10
10
10
Of stores
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
3.00%
28 Current Assets
Receivables
Other Current assets
29 Current Liabilities
Trade Creditors
Other Current liabilities
CMA DATA - FORM II
OPERATING STATEMENT
Days
2012
2013
2014
2015
2016
2017
2018
165
330
330
330
330
330
330
(Rs. Lacs)
Sales
1909
4838
4945
4955
4955
4955
4955
Raw materials
1404
2900
2961
2961
2961
2961
2961
337
719
735
738
742
746
750
-375
-15
-8
0
0
0
0
1366
3604
3688
3699
3703
3707
3711
112
225
225
225
225
225
225
1478
3829
3913
3924
3928
3932
3936
Gross profit
431
1009
1032
1031
1027
1023
1019
Indirect exps.
55
140
143
144
144
144
144
Profit before tax
376
869
889
887
883
879
875
Interest
150
296
274
234
194
154
118
Operating profit
226
573
615
653
689
725
757
1
1
1
1
1
1
1
52
154
184
210
233
255
275
Net profit
173
418
430
442
455
469
481
Cash accruals
286
644
656
668
681
695
707
Direct expenses
Stock Adjustments
Depreciation
Total
Misc. Exps. W/off.
Taxes
CMA DATA - FORM III
ANALYSIS OF BALANCE SHEET
2012
2013
2014
2015
2016
2017
2018
(Rs. Lacs)
CURRENT LIABILITIES
Bank Borrowing for W.C
- From Existing ban
800
800
900
900
900
900
900
- From other banks
-
-
-
-
-
-
-
800
800
900
900
900
900
900
60
88
90
90
90
90
90
174
348
348
348
348
174
0
2
3
3
3
3
3
3
236
439
441
441
441
267
93
1036
1239
1341
1341
1341
1167
993
Installments for more than one year
1566
1218
870
522
174
0
0
TOTAL OUTSIDE LIABILITIES
2602
2457
2211
1863
1515
1167
993
Equity with premium
683
683
683
683
683
683
683
General reserves
172
590
1020
1462
1916
2384
2865
Unsecured loans from promoters
227
227
227
227
227
227
227
Sub-total
1082
1500
1930
2372
2826
3294
3775
TOTAL LIABILITIES
3684
3957
4141
4235
4341
4461
4768
Sub-total
Trade Creditors
Installments falling due within on
year
Other
Sub-total
TOTAL CURRENT LIABILIITES
TERM LIABILITIES
Term Loans
NET WORTH
CMA DATA - FORM III
ANALYSIS OF BALANCE SHEET
CURRENT ASSETS
Cash and Bank Balance
Fixed Deposits with bank - Margin
Money
Receivables
Sub-total
INVENTORIES
Raw Material
Work-in-progress
Finished goods
Others
Sub-total
Advances
TOTAL CURRENT ASSETS
Gross Block
Less : Depreciation
NET BLOCK
Other Non-current assets
Preliminary exps. Not W/off
TOTAL ASSETS
Current Ratio
TOL / TNW
TL/TNW
2012
2013
2014
2015
2016
2017
2018
35
38
413
731
1063
1409
1942
-283
567
580
580
581
581
581
426
78
297
3
804
54
1176
112
2499
527
82
309
4
922
149
1676
337
2274
538
83
316
4
941
152
2086
562
2049
538
83
317
4
942
152
2405
787
1824
538
83
317
4
942
152
2738
1012
1599
538
83
317
4
942
152
3084
1237
1374
538
83
318
4
943
152
3618
1462
1149
9
3684
8
3958
6
4141
5
4234
4
4341
3
4461
1
4768
COMPARATIVE STATEMENT OF
CURRENT ASSETS & CURRENT LIABILITIES
FORM - IV
2012
2013
2014
2015
2016
2017
2018
A
:
CURRENT ASSETS
1
Raw material
a)
Imported
b)
Indigenous
2)
0
0
0
0
0
0
0
426
527
538
538
538
538
538
Stores
0
0
0
0
0
0
0
a)
Imported
0
0
0
0
0
0
0
b)
Indigenous
3
4
4
4
4
4
4
3
Stock in process
79
82
83
83
83
83
83
4
Finished Goods
297
309
316
317
317
317
318
5
Receivables
283
567
579
580
580
580
580
6
Export receivables
0
0
0
0
0
0
0
7
Advances To Suppliers of Goods
0
0
0
0
0
0
0
8
Other current assets incl. Cash & bank
90
187
565
883
1215
1561
2094
6
TOTAL CURRENT ASSETS
1176
1676
2086
2406
2738
3085
3618
COMPARATIVE STATEMENT OF
CURRENT ASSETS & CURRENT LIABILITIES
FORM IV
2012
2013
2014
2015
2016
2017
2018
60
88
90
90
90
90
90
Advances From Customers
0
0
0
0
0
0
0
9
Statutory Liabilities (hire purchase)
0
0
0
0
0
0
0
10
0
0
0
0
0
0
0
ii)
Other Current Liabilities
Interest on term loan of GIIC –
deferred
Installments payable within one
year
174
348
348
348
348
174
0
iii)
Dividend Payables
0
0
0
0
0
0
0
iv)
Installments of Term Loans, DPG
0
0
0
0
0
0
0
2
3
3
3
3
3
3
235
439
440
440
440
266
92
B.
CURRENT LIABILITIES
7
Creditors
8
I)
Public Deposits, debentures etc
v)
Other liabilities
11
TOTAL CURRENT LIABILITIES
COMPUTATION OF MAXIMUM PERMISSIBLE
BANK FINANCE FOR WORKING CAPITAL
FORM V
2012
1
2
Total Current Assets (9 in Form IV)
Other Current Liabilities (other than Bank
Borrowings)
3
Working Capital Gap(WCG) (1-2)
4
Minimum Stipulated Net Working capital
5
Actual Project Net Working capital
2013
2014
2015
2016
2017
2018
1176
1676
2086
2406
2738
3085
3618
235
439
440
440
440
266
92
941
1237
1646
1965
2298
2818
3525
0
419
521
601
685
771
904
141
437
746
1065
1398
1918
2625
(45 in Form-III)
6
Item 3 Minus Items4
941
818
1124
1364
1613
2047
2621
7
Item 3 Minus Items5
800
800
900
900
900
900
900
8
Maximum Permissible Bank Finance
800
800
900
900
900
900
900
(Item 6 or 7 Whichever is Lower)
Excess Borrowings representing Short fall
in net working capital (4-5)
800
800
900
900
900
900
900
9
FUNDS FLOW STATEMENT - FORM VI
2012 2013 2014 2015
2016
2017
2018
1
a)
b)
c)
d)
SOURCES
Net Profit After Tax
Depreciation
Increase in capital
Increase in Term Liabilities
increase in unsecured loans
172
112
683
1566
228
418
225
0
0
0
430
225
0
0
0
441
225
0
0
0
454
225
0
0
0
468
225
0
0
0
481
225
0
0
0
f)
I)
g)
h)
Decrease in:
Fixed Assets
Others (P & P Written Off)
TOTAL
0
1
2762
0
1
644
0
1
656
0
1
668
0
1
680
0
1
695
0
1
707
2
a)
USES
Decrease in Term Liabilities
0
348
348
348
348
174
0
b)
I)
ii)
Increase in:
Fixed Assets
Other non Current Assets - P & P
Normal Capital Expenditure
Deferred receivables
Dividend payment
Others - Decrease in Creditors for P&M
Total
Long Term Surplus(=)Deficit(-)1-2
2611
10
0
0
0
0
2621
141
0
0
0
0
0
0
348
296
0
0
0
0
0
0
348
308
0
0
0
0
0
0
348
320
0
0
0
0
0
0
348
332
0
0
0
0
0
0
174
521
0
0
0
0
0
0
0
707
iii)
c)
d)
e)
3
4
5
Increase/Decrease in Current
Assets
6
Increase/Decrease in Current
Liabilities other than Bank
Borrowing
Increase/Decrease in working
capital gap
7
Net Surplus(=) Deficit(-)
8
(Difference of 3 &6)
Increase/Decrease in Bank
Borrowing
INCREASE/DECREASE IN NET
SALES
1176
496
36
2
0
0
0
235
-203
-2
0
0
174
174
941
296
408
320
332
521
707
-800
0
-100
0
0
0
0
800
0
100
0
0
0
0
1909
2929
107
10
0
0
0
Production
Sales (Net of stock)
VARIABLE EXPENSES
Raw Material & Packing
Mat.
Power & fuel
Wages
Stores and Spares
Mfg. Exps.
Selling Exps.
Interest on working Capital
BREAK EVEN ANALYSIS
2012
2013
2014
2015
2016
2017
2018
Kgs. 1479916 3056349 3120693 3120693 3120693 3120693 3120693
2284.55 4853.43 4953.53 4954.86 4954.82 4954.83 4954.84
100% 1404.24 2900.07 2961.12 2961.12 2961.12 2961.12 2961.12
90%
191.31
395.09
403.40
403.40
403.40
403.40
403.40
90%
52.21
104.42
107.56
110.78
114.11
117.53
121.05
100%
18.31
46.76
47.79
47.89
47.89
47.89
47.89
90%
32.95
84.16
86.03
86.20
86.20
86.20
86.20
100%
27.46
70.14
71.69
71.83
71.83
71.83
71.83
100%
50.00
100.00
112.50
112.50
112.50
112.50
112.50
Total Variable Expenses
1776.47 3700.63 3790.09 3793.72 3797.05 3800.47 3804.00
CONTRIBUTION
508.08
1152.80
1163.44
1161.14
1157.77
1154.36
1150.85
22.24%
23.75%
23.49%
23.43%
23.37%
23.30%
23.23%
21.26
5.80
3.66
27.46
112.48
100.05
43.90
11.60
9.35
70.14
224.97
195.93
44.82
11.95
9.56
71.69
224.97
161.75
44.82
12.31
9.58
71.83
224.97
121.73
44.82
12.68
9.58
71.83
224.97
81.71
44.82
13.06
9.58
71.83
224.97
41.69
44.82
13.45
9.58
71.83
224.97
5.84
Total Fixed Expenses
BREAK EVEN POINT
270.71
555.89
524.74
485.24
445.59
405.95
370.49
Production (kg.)
788519 1473794 1407500 1304135 1201047 1097436 1004634
Sales (Rs. lacs)
1217.24 2340.36 2234.15 2070.63 1906.94 1742.44 1595.09
Capacity Utilisation
CASH BREAK EVEN
49.02%
45.81%
43.75%
40.54%
37.33%
34.11%
31.23%
Production (kg.)
460878
877347
804067
699504
594660
489256
394596
Sales (Rs. Lacs)
Capacity Utilisation
711.46 1393.21 1276.31
28.65% 27.27% 24.99%
1110.63
21.74%
944.16
18.48%
776.81
15.21%
626.52
12.27%
% of sales
FIXED EXPENSES
Power
Wages
Mfg. Expenses
Administrative exps
Depreciation
Interest on term loan
10%
10%
10%
100%
100%
100%
Sales
Less : 5%
Revised sales
Reduced by
Net profit before tax
Revised Net profit before tax
Less : Tax @ 33.33%
Profit after Tax
SENSITIVITY ANALYSIS
If sale price is reduced by 5%
2012
2013
2014
2015
2284.55
4853.43
4953.53
4954.86
114.23
242.67
247.68
247.74
2170.32
4610.76
4705.85
4707.12
114.23
242.67
247.68
247.74
224.42
572.27
614.06
651.26
110.19
329.60
366.38
403.51
36.74
109.89
122.15
134.53
73.46
219.71
244.23
268.98
2016
4954.82
247.74
4707.08
247.74
687.54
439.80
146.63
293.17
2017
4954.83
247.74
4707.09
247.74
723.77
476.03
158.71
317.32
2018
4954.84
247.74
4707.10
247.74
755.72
507.97
169.36
338.62
Add back :
Interest on term loan
Depreciation
Preliminary Expenses
Net cash accruals
100.05
112.48
1.25
287.24
195.93
224.97
1.25
641.86
161.75
224.97
1.25
632.20
121.73
224.97
1.25
616.93
81.71
224.97
1.25
601.10
41.69
224.97
1.25
585.23
5.84
224.97
1.25
570.67
Repayment obligation
Interest
Principal
Total Repayment
D.S.C.R
100.05
0.00
100.05
2.87
195.93
174.00
369.93
1.74
161.75
348.00
509.75
1.24
121.73
348.00
469.73
1.31
81.71
348.00
429.71
1.40
41.69
348.00
389.69
1.50
5.84
174.00
179.84
3.17
1.61 times
224.42
572.27
114.23
242.67
110.19
329.60
110.19
329.60
36.74
109.89
614.06
247.68
366.38
366.38
122.15
651.26
247.74
403.51
403.51
134.53
687.54
247.74
439.80
439.80
146.63
723.77
247.74
476.03
476.03
158.71
755.72
247.74
507.97
507.97
169.36
Average D.S.C.R
Taxable profit
Reduced by
Taxes @ 33.33%
Raw material
Add : Increase by 5%
Increased cost of Raw material
Increase by
Net profit before tax
Revised Net profit before tax
Taxes @ 33.34%
Profit after Tax
Add back :
Interest on term loan
Depreciation
Preliminary exps. written off
Repayment obligation
Interest
Principal
Total Repayment
D.S.C.R
Average D.S.C.R
Taxable profit
Reduced by
Taxes @ 33.34%
SENSITIVITY ANALYSIS
If raw material price is increased by 5%
2012
2013
2014
2015
1404.24 2900.07 2961.12 2961.12
70.21
145.00
148.06
148.06
1474.45 3045.07 3109.18 3109.18
70.21
145.00
148.06
148.06
224.42
572.27
614.06
651.26
154.21
427.27
466.00
503.20
51.41
142.45
155.37
167.77
102.80
284.82
310.64
335.43
2016
2961.12
148.06
3109.18
148.06
687.54
539.49
179.87
359.62
2017
2961.12
148.06
3109.18
148.06
723.77
575.71
191.94
383.77
2018
2961.12
148.06
3109.18
148.06
755.72
607.66
202.59
405.07
100.05
112.48
1.25
316.58
195.93
224.97
1.25
706.97
161.75
224.97
1.25
698.61
121.73
224.97
1.25
683.38
81.71
224.97
1.25
667.55
41.69
224.97
1.25
651.68
5.84
224.97
1.25
637.12
100.05
0.00
100.05
3.16
195.93
174.00
369.93
1.91
161.75
348.00
509.75
1.37
121.73
348.00
469.73
1.45
81.71
348.00
429.71
1.55
41.69
348.00
389.69
1.67
5.84
174.00
179.84
3.54
1.78 times
224.42
572.27
70.21
145.00
154.21
427.27
154.21
427.27
51.41
142.45
614.06
148.06
466.00
466.00
155.37
651.26
148.06
503.20
503.20
167.77
687.54
148.06
539.49
539.49
179.87
723.77
148.06
575.71
575.71
191.94
755.72
148.06
607.66
607.66
202.59
KEY FINANCIAL PARAMETERS
For the year ending 31st
March
Gross profit to sales
Operating profit to sales
Net profit to sales
Interest to sales
Raw material to sales
Current Ratio
Debt Equity Ratio
TOL /TNW
2012
21.37%
9.82%
7.54%
6.57%
61.47%
1.37
1.61
2.42
2013
22.55%
11.79%
8.61%
6.10%
59.75%
1.88
1.04
1.65
2014
22.50%
12.40%
8.68%
5.54%
59.78%
2.10
0.63
1.15
2015
22.44%
13.14%
8.91%
4.73%
59.76%
2.42
0.37
0.79
2016
22.36%
13.88%
9.16%
3.92%
59.76%
2.76
0.18
0.54
2017
22.28%
14.61%
9.45%
3.11%
59.76%
3.11
0.05
0.35
2018
22.21%
15.25%
9.71%
2.39%
59.76%
3.65
0.00
0.26
DSCR (Normal)
3.86
2.27
1.61
1.68
1.77
1.89
3.96
DSCR (Normal) Maximum
Minimum
Average
3.96
1.61
2.06 times
2.87
1.74
1.61 times
1.24
1.31
1.40
1.50
3.17
3.16
1.91
1.78 times
1.37
1.45
1.55
1.67
3.54
IRR-PROJECT (15 years)
Post tax
Pre tax
Sensitivity analysis - D.S.C.R
Sales price reduced by 5%
Average
33.20%
44.72%
Raw material cost inc by 5%
Average
Break Even Analysis
Production (Kgs.)
Sales (Rs. Lacs)
Capacity Utilisation
788519
1217
49.02%
1473794
2340
45.81%
1407500
2234
43.75%
1304135
2071
40.54%
1201047
1907
37.33%
1097436
1742
34.11%
1004634
1595
31.23%
Cash Break Even Analysis
Production (Kgs.)
Sales (Rs. Lacs)
Capacity Utilisation
460878
711
28.65%
877347
1393
27.27%
804067
1276
24.99%
699504
1111
21.74%
594660
944
18.48%
489256
777
15.21%
394596
627
12.27%
Thank You..
PKM Advisory Services Pvt. Ltd.
A-411-412, Safal Pegasus, Nr. Prahalad Nagar Garden, 100 Ft Road,
Anand Nagar Road, Prahaladnagar, Ahmedabad - 380054
Phone no : +91-79-40065204 Fax: +91-79-40067203 Email:
[email protected]
Web: www.pkmadvisory.com