“WORKING CAPITAL MANAGEMENT IN SWARAJ

MAHALAKSHMI TRACTORS,NANDYAL”

A Project Report Submitted To

Sri Rama Krishna Degree And PG (Autonomous)College,Nandyal

In partial fulfillment for the Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

Submitted By

BHUMA BHARGAVI

Reg. No. 1830006

Under the guidance of

Mrs. SRAVANI KUMARI M.B.A,

Assistant Professor

DEPARTMENT OF BUSINESS MANAGEMENT

SRI RAMA KRISHNA DEGREE &P.G. (AUTONOMOUS) COLLEGE,

NANDYAL - 518501.
(Affiliated to Rayalaseema University, Kurnool)
SEPTEMBER- 2020
 CERTIFICATE

I do hereby certify that Miss. BHUMA BHARGAVI bearing Regd.no.1830006 is

a bonafide student of MBA course in the Department of Business Management, Sri
Ramakrishna Degree & Postgraduate College (Autonomous), Nandyal, affiliated to
Rayalaseema University, Kurnool. I further certify that the project report entitled ”
WORKING CAPITAL MANAGEMENT IN SWARAJ MAHALAKSHMI TRACTORS,
NANDYAL” is bonafide record of the project work carried out by her and that this has not
formed the basis for the award of any degree, diploma or title.

Place: Nandyal DIRECTOR

Date:
 Sri Rama Krishna Degree &P.G.(Autonomous) College
(Recognized By Govt. Of A.P. and Affiliated to Sri Rayalaseema
University,Kurnool)

Asst. Prof.: Mrs. SRAVANI KUMARI M.B.A.

CERTIFICATE

I do hereby certify that Miss. BHUMA BHARGAVI bearing Regd.no.

1830006 is a bonafide student of MBA course in the Department of Business
Management, Sri Ramakrishna Degree & Postgraduate College (Autonomous), Nandyal,
affiliated to Rayalaseema University, Kurnool. I further certify that the project report
entitled “ WORKING CAPITAL MANAGEMENT IN SWARAJ MAHALAKSHMI
TRACTORS, NANDYAL” is bonafide record of the project work carried out by her
and that this has not formed the basis for the award of any degree, diploma or title.

Place: Nandyal PROJECT GUIDE

Date:
 DECLARATION

I Bhuma Bhargavi is a student of Master of Business Administration at

Sri Rama Krishna Degree & PG. (autonomous) College, Nandyal, here by declare that
the project report entitled” WORKING CAPITAL MANAGEMENT IN SWARAJ
MAHALAKSHMI TRACTORS, NANDYAL.” is an original and bonafide work done by
me in Partial fulfillment for the requirement of award of “MASTER OF BUSINESS
ADMINISTRATION” by Rayalaseema University, Kurnool, during the academic year
of 2018-2020.

This is a bonafide work under taken by me and this was not submitted to any
university of institution for the award of any degree,diploma and certificate.

Date: - BHUMA BHARGAVI

Place:-Nandyal Reg. No.1830006

 ACKNOWLEDGEMENT

I am very happy to present this project report entitled “WORKING CAPITAL

MANAGEMENT IN SWARAJ MAHALAKSHMI TRACTORS, NANDYAL” for the
award of the degree of “Master of Business Administration”.

I would like to express my indebtedness to Dr .G. Rama Krishna Reddy, M. Com.,

Ph.D Principal of Sri Rama Krishna P.G (Autonomous) College for providing this
opportunity.

I am thankful to Prof. K.L.N.REDDY GARU., Director of Sri Rama Krishna

Degree & P.G (Autonomous) College for his timely advice and necessary co- operation
in completing the work.

I express my thanks to my project guide Mrs.SRAVANI KUMARI M.B.A, Assistant

professor, Department of Commerce & Management, in Sri Ramakrishna Degree &
P.G (Autonomous) College, Nandyal. Who has encouraged me from time to time with
her valuable suggestions and involvement. This enabled me to successfully complete my
projectwork.

Last but not least I thank all people who directly or indirectly
contributed their efforts for successful completion of my Project work.

Date: - BHUMA BHARGAVI

Place:-Nandyal Reg. No.1830006.
 INDEX
CONTENTS PAGE NO.
Chapter-1 Introduction 1-20
Chapter-2 Review of Literature 21-24

Chapter-3 Research Methodology 25-28

3.1 Research Methodology

3.1.1 Primary Data
3.1.2. Secondary Data
3.2 Need for the Study
3.3 Scope of the Study
3.4 Objectives of the Study
3.5 Limitations of the Study
Chapter – 4 29-51

Company and Industry Profile

4.1 Company Profile
4.2 Industry Profile
Chapter-5 Data analysis and Interpretation 52-68

Chapter-6 Findings, Suggestions &Conclusion 69-71

6.1 Findings
6.2 Suggestions
6.3 Conclusion
Chapter-7 Bibliography 72
 CHAPTER -1
1. INTRODUCTION

One of the most important areas in the day-to-day management of the firm is the
management of working capital. Working capital management is the functional area of the
finance that covers all the current accounts of the firm. It is concerned with management of
the level of individual current assets as well as the management of total working capital.
Financial management means procurement of funds and effective utilization of these
procured funds. Procurement of funds is firstly concerned for financing working capital
requirement of the firm and secondary for financing fixed assets.

1.1 Meaning of working capital:

Ordinarily, the term “working capital” stands for that part of the capital, which is
required for the financing of working or current needs of the company. Working capital is
the lifetime of every concern. Whether it is manufacturing or non-manufacturing one with
out adequate working capital, there can be no progress in the industry.

Inadequate working capital means shortage of raw materials, labor etc., resulting in
partial current assets less current liabilities-has no economic meaning in the sense of
implying some type of normative behavior. According to this line of reasoning, it is largely
an accounting artifact. Working capital management, then, is a misnomer.

The working capital of the firm is not managed. The term describes a category of
management decisions affects specific types of current assets and current liabilities. In turn,
those decisions should be rooted in the overall Valuation of the firm.

1
1.2 Definition:
According to Western and Brigham, ”Working capital refers to a firm‟s investment
in short term assets- cash, short term securities, accounts receivables and inventories”.

According to Hoagland, “working capital is descriptive of that capital which is not

fixed. But the more common use of the working capital is to consider it as the difference
between the book value of the current assets and the current liabilities.

1.3 Concepts of working capital

The term working capital can be used in two different ways: they are
A. Gross Working Capital:
The gross working capital refers to investment in all the current assets taken
together. The total of investments in all current assets is known as gross working capital.

B. Net Working Capital:

The term net working capital refers excess of total current assets over total current
liabilities. It may be noted that the current assets refers to these liabilities which are payable
with in a period of one year.

1.4 Types of working capital:

From the point of view of time, the term working capital can be divided into two
categories.

A. Permanent working capital:

It is also refers to the hard core working capital. it is the minimum level of
investment in the current assets that is carried by the business at all times to carries our
minimum level of its activities.

2
B. Temporary working capital:

It refers to the part of total working capital which is required by a business over and about
permanent working capital. It is also called variable working capital. Since the volume of
the temporary working capital keeps on fluctuating from time to time according to the
business activities it may be financed from short term resources.
Permanent working capital can be further divided into:

1. Regular Working Capital

2. Reserve Working Capital

1. Regular Working Capital:

It is the minimum amount of liquid capital needed to keep up the circulation of the
capital from cash to inventories to receivables and again to cash. This would include
sufficient minimum bank balance to discount all bills, maintain adequate supply of raw
materials etc...

2. Reserve Working Capital:

It is the excess over the needs or regular working capital that should be kept in
reserve for contingencies that may arise at any time these contingencies include rising
prices, business depression, strikes and special operations such as experiments with new
products.

3
1.5 Composition Of Working Capital:

1.Current Assets:
a. Inventories Raw Materials
Work in progress
Finished goods
Stores and spares
Miscellaneous Goods
b. Receivables Trade debtors
Loans and advances
Other debtor balances
c. Marketable securities Govt securities
Semi-Government securities
Shares, Debenture, etc.,
d. Cash and bank balance Cash in Hand
Cash At Bank
Cash in Transit
2.Current Liabilities:

a. Sundry creditors Interest accused on loan

Advances received from customs
Short term loans from banks
Trade dues and other liabilities
Deposits from public, etc.,

4
 1.6 Sources of Working Capital:

Working Capital Sources

Long – term sources Short-term sources

Internal External

1. Sale of shares 1. Depreciation funds 1. Trade credit

2. Sale of Debentures 2. Provision of Taxation 2. Credit papers
3. Sale of idle fixed assets 3. Accrued Expenses 3. Bank credit
4. Long-term loans 4. Public Deposits
5. Customers credit
6. Loans from directors
7. Security of employee
8. Factoring

1.7 General factors determining working capital requirements:

The working capital needs of a firm are determined & influenced by various factors.
A wide variety of considerations may affect the quantum of working capital required &
these considerations may vary from time to time. The working capital needed at one point
of time may not be good enough for some other situation. The determination of working
capital requirements is a continuous process & must be undertaken on a regular basis in the
light of the changing situations. Following are some of the factors which are relevant in
determining the working capital need of the firms.

1. Production policy
2. Nature of the business
3. Credit policy
4. Inventory policy
5. Abnormal factors
5
6. Market conditions
7. Conditions of supply
8. Business cycle
9. Growth and expansion
10. Level of taxes
11. Dividend policy
12. Price level changes
13. Operating efficiency

1. Production Policy:
The production schedule i.e., the plan for production, has great influence on the level
of the inventories. In some cases raw materials can be produced only in a particular season
and have to be stocked for the production of the whole year. In many others the production
cycle is limited to a part of the year and raw materials have to be accumulated throughout
the year. thus, need for working capital will very according to the production plans.

2. Nature of the Business:

The size of business also has an important impact on its working capital needs. Size
may be measured in terms of the scale of operations. A firm with large scale of operation
will need working capital than small term. The working capital requirements of a firm are
basically influenced by the nature of the business trading and financial firm has a very less
investment in fixed assets, but require a large sum of money to be invested in working
capital.

3.Credit Policy:
A company, which allows liberal credit to its customers, may have higher sales but
consequently will have large amount of funds tied up in sundry debtors. Credit terms, Debt
collection system also influences the level of working capital.

6
4.Inventory policy:
Large amount of funds is normally locked up in inventory. An efficient firm may stock
raw material for a smaller period and may therefore require lesser amount of working
capital.

5.Abnormal factors:
Abnormal factors like strikes, lockouts also require additional working capital.
Recessionary conditions necessitate a higher amount of stock of finished goods.

6.Market conditions:
Market conditions like competition large inventory are essential as delivery has to be
off the self or credit has to be extended on liberal terms when market competition is fierce.

7.Conditions of supply:
If prompt and adequate supply of raw materials requires small investment in inventory.
If supply is scant, seasonal canalized, it is essential to keep longer stocks increasing
working capital requirements.

8.Business cycle:
Business fluctuations lead to cyclical and seasonal changes in production, sales and
effect the working capital requirements.

9.Growth and expansion:

The working capital needs of firm increases in growth in terms sales of fixed assets. If
is difficult to precisely determine the relationship between volume of sales and the working
capital needs. The critical fact however that is the need for increased working capital funds
does not fallow growth in business activities but precedes it.

10.Level of taxes:
Taxation is a short term liability payable in cash. Advance payment of cash may have
to be paid on the basis of anticipated profits. Tax is first appropriation out of profits. Higher
the tax, greater is the stain on the working capital of the company. Working capital varies
with tax rate and advanced tax provisions.
7
11.Dividend policy:
Payment of dividend utilizes cash while retaining profits acts as a source of working
capital.

12.Price Level changes:

Inflationary trends in the economy necessitate more working capital maintain the same
level of activity.

13.Operating efficiency:
The operating efficiency of the firm relates to the optimum utilization of resources at
minimum costs. The firm will be effectively contributing in keeping the working capital
investment at a lower level if it is efficient to controlling operating costs and utilizing
current assets. The use of working capital is improved and pace of a cash conversion cycle
is accelerated with operating efficiency.

8
Advantages of good working capital management:

The main advantages of sound working capital are as follows:

Solvency of the business: adequate working capital helps in maintaining solvency
of the business by providing uninterrupted flow of production.

1. Goodwill: sufficient working capital enables a business concern to make prompt

payments and hence helps in crating and maintaining goodwill.

2. Easy loans: a concern having adequate working capital, high solvency and good
Credit standing can arrange loans from banks on easy and favorable terms.

3. Cash discount: adequate working capital also enables a concern to avail cash
discounts on the purchases and maintaining goodwill.

4. Regular supply of raw materials: sufficient working capital ensures regular supply
of raw materials and continuous production.

5. Regular payment of salaries, wages and other day-to-day commitments: a company

which has ample working capital can make regular payment towards it day-today
commitments which would raise the morale of its employees, increase their
efficiency, reduce wastage cost and enhance production and profits.

6. Exploitation of favorable market conditions: only concerns with adequate working

capital exploit favorable market conditions such as purchasing its requirements in
bulk when the prices are lower and holding its inventories for higher prices.

7. Crisis handling ability: adequate working capital enables a concern to face business
crisis, such as depression, inflation successfully.

8. Quick and regular return on investments: sufficiency of working capital enables a

concern to pay quick and regular dividends to its investors, as there may not be
much pressure to plough back profits.

9
 9. High morale: adequacy of working capital creates an environment of security,
confidence and high morale and improves the overall efficiency of a business.

Disadvantages of Inadequate Working Capital:

1. A concern which has inadequate working capital cannot pay its short-term liabilities
in time. Thus, it will lose its reputation and shall not be able to obtain good credit
facilities.

2. It cannot buy its requirements in bulk and cannot avail discounts.

3. It becomes difficult for the firm exploits favorable market conditions and under take
profitable projects.

4. The firm cannot pay its day-to-day expenses, which would increase cost and reduce
the profit of the business.

5. It becomes impossible to utilize efficiently the fixed assets due to the non-
availability of liquid funds.

6. The rate of return on investments will also fall with the shortage of working capital.

10
1.8 Working capital cycle ( the operating cycle):
The working capital cycle refers to the length of time between the firm‟s
paying cash for materials, etc., entering in to the production process/ stock and the inflow
of cash from debtors. Suppose a company has a certain amount of cash it will need raw
materials. Some raw materials will be available on credit but, cash will be paid out for the
other part immediately. Then it has to pay labour cost and incurs factory overheads. These
three combined together will constitute work-in-progress. After the production cycle is
complete, work-in-progress will get converted into sundry debtors. Sundry debtors will be
realized in cash after the expiry of credit period. this cash can again be used for financing
of raw materials, work-in-progress, etc. thus there is a complete cycle from cash to cash
where in cash gets converted into raw materials, work-in-progress, finished goods, debtors
and finally into cash again. Short term funds are required to meet the requirements of
funds during this period. This time period is dependent upon the length of time within
which the original cash gets converted into cash again. This cycle is also known as
operating cycle or cash cycle.

11
 OPERATING CYCLE

Cash

Bills Raw Materials

Receivables
Or Debtors

Working in
Credit Sales progress

Finished goods

12
 Working capital cycle indicates the length of time between companies 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. For e.g., a
company holds raw materials on an average for 60 days, it gets credit from the supplier for
15 days, production process needs 15 days, finished goods are held for 30 days and 30 days
credit is extended to debtors. The total of all these 120 days, i.e., 60-15+15+30+30 days is
the total working capital cycle.

The determination of working capital cycle helps in the forecast, control and
management of working capital. It indicates the total time lag and the relative significance
of its constituting parts. The duration of working capital cycle may vary depending on the
nature of the business.

The Operating Cycle consists of the following events which continues through the
life of business

 conversion of cash into raw materials

 conversion of raw materials into work in progress
 conversion of WIP into finished stock
 conversion sales
 conversion of account receivable into cash

1.9 Components of Working Capital

Working Capital management involves different components such as

1. Management of cash
2. Management of Inventory
3. Management of Receivables

1. Management of cash:
Cash is the important current asset for the operation of the business. Cash is the
basic input needed to keep the business running on continuous basis; it is also the ultimate
output expected to be realized by selling the services of product manufactures by the firm.

13
 The firm should keep sufficient cash, neither more nor less. Cash shortage will
disrupt the firm‟s manufacturing operations while excessive cash will simply remain idle,
with out contributing anything towards the firm‟s profitability. Thus, major functions of
the financial manager to maintain a sound cash position.

Cash is the money, which a firm can disburse immediately with out any restriction.
The term cash includes coins, currency and cheques held by the firm, and balance in its
bank accounts. Some times near cash items, such as marketable securities or bank times
deposits, are also includes in cash. The basic characteristic of near cash assets is that they
can readily be converted to cash. Generally when a firm has excess of near cash, it invests
it in marketable securities. This kind of investment contributes some profit to the firm.
a. Facts of cash management:
Cash management is concerned with the managing of

1) Cash flows into and out of the firm

2) Cash flows with in the firm and
3) Cash balance held by the firm a points of time by financing deficit or
investing surplus cash. It can be represented by a cash management cycle as showing
fig1.sales generates cash, which has to be disbursed out. The surplus cash has to be invested
while deficit has to be borrowed. Cash management seeks to accomplish this cycle at a
minimum cost. At the same time, it also seeks to achieve liquidity and control.

Cash management assumes more importance than other current assets because it is
the most significant and the least productive asset that a firm holds. It is a significant
because it is used to pay the firm‟s obligations. However, cash is unproductive. Unlike
fixed assets or inventories, it does not produce goods for sales. Therefore, the aim of cash
management is to maintain adequate control over cash position to keep the firm sufficiently
liquid and to be use excess cash in some profitable way.

b. Cash Planning:
Cash inflows and outflows should be planned to project cash surplus or deficit for
each period of the planning period. Cash budget should be prepared for this purpose.

14
C. Managing the cash flows:
The flow of cash should be properly managed. The cash should be accelerated
while, as far as possible, the cash outflows should be decelerated.

d. Optimum cash level:

The firm should decide about the appropriate level of cash balances. The cost of
excess cash and danger of deficiency should be matched to determine the optimum level of
cash balances.

e. Investing surplus cash:

The surplus balance should be properly invested to earn profits. The firm should
decide about the division of cash balances between alternative short-term investment
opportunities such as bank deposits, marketable securities, or inter corporation lending.

The ideal cash management system will depends on the firm‟s products,
organization structure, competition, culture and option available. The task is complex, and
decisions taken can affect important areas of the firm. For example, to improve collection
if the credit period is reduced, it may affect sales. However, in certain cases, even without
fundamental changes, it possible to significantly reduce cost of cash management system
by choosing a right bank and controlling the collections properly.

f. Motives for holding cash:

The firm‟s needs for cash may be attributed to the following needs
i. Transaction motive
ii. Precautionary motive
iii. Speculation motive
iv. Translation motive

i. Transaction motive:
The transaction motive requires a firm to hold cash to conduct its business in the
ordinary cost. The firm needs cash primarily to make payments for purchases, wages and
salaries, other operating expenses, taxes, dividends etc. the need to hold cash would not
arise if there were perfect synchronization between cash receipts and cash payments, i.e.,
enough cash is received when the payment has to be made.
15
 But cash receipts and payments are not perfectly synchronized. For those periods,
when cash payments exceed cash receipts, the firm should maintain some cash balance to
be able to make required payments. For transaction purpose, a firm may invest its cash in
marketable securities; usually the firm will purchase securities whose maturity corresponds
with some anticipated payments. Such as dividends, or taxes in the future. Notice that the
transactions motive mainly refers to holding cash to met anticipated payments whose
timing is not perfectly matched with receipts.

16
ii. Precautionary motive:
A firm also keeps cash balances to meet unexpected cash needs arising out of
unexpected contingencies such as floods, strikes, presentment of bills for payment earlier
than expected date, sharp increase in raw materials price etc,. The more is the possibility of
such contingencies, the more is the amount of cash kept by the firm for meeting them.

iii. Speculative motive:

A firm also keeps cash balance to take advantage of unexpected opportunities
typically outside the normal course of business, such motive is therefore a purely
speculative for example a firm may like to take advantage of an opportunity to purchase
raw material at reduced prices in anticipation of decline prices, similarly, it may like to
keep some c ash balance to make profit by buying securities at ties when their prices fall
due to tight money conditions etc,.
g. Cash planning:
Cash planning is a technique to plan and control the use of cash. It protects the
financial condition of the firm by developing a projected cash statement from a forecast of
expected cash inflows and outflows for a given period. The forecast may be used on the
present operations or anticipated future operations. Cash plans are very crucial in
developing the overall operating plans of the firm.

h. Cash forecasting and budgeting:

Cash budget is the most significant device to plan for and control cash receipts and
payments. A cash budget is a summary of the firm‟s expected cash inflows over a projected
period. It gives information on the timing and magnitude of expected cash flows and cash
balances over the projected period. This information helps the financial manager to
determine the future cash needs of the firm, plan for the financing of these needs and
exercise control over the cash and liquidity of the firm.

The time horizon of a cash budget may differ from firm to firm. A firm whose
business is affected by seasonal variations may prepare monthly cash budgets. Daily or
weekly budgets should be prepared for determine cash requirements if cash flows extreme

fluctuations. Cash budgets for a longer interval may be prepared if cash flows are relatively
stable
17
2. Management of Inventory:
The preceding two chapter‟s basic strategies and consideration in managing current
assets namely, cash and receivables are stocks of product a company is manufacturing for
sale and components that make up a product. Inventories like receivables are also a
significant portion of most firms‟ assets and accordingly require substantial investment. To
keep these investments from becoming unnecessarily large, inventories must be managed
efficiently. The various forms in which inventories exist in a manufacturing company are
a) Raw Materials: Raw materials are those basic inputs that are converted into finished
products through the manufacturing process. Raw material inventories are those units,
which have been purchased and stored for future productions.
b) Work-in-progress: The work-in-progress is that stage of stock, which is in between
raw materials and finished goods. They are semi-finished products that need more
work before they become finished products for sale. The quantum of WIP depends
on the time taken in the manufacturing process. The greater the time taken in
manufacturing, the more will be the amount of work-in-progress.
c) Finished goods: Finished goods inventories are those completely manufactured
products, which are ready for sale. Stocks of raw material and work-in-process
facilitate production while stock of finished goods is required for smooth marketing
operations.

The level of three kinds of inventories for a firm depends on the nature of its business.
A manufacturing firm will have substantially high level of all three kinds of inventories.

A fourth kind of inventory Firm also maintains suppliers. Suppliers include office
and plant cleaning material oil, fuel, light bulbs etc. these materials do not directly enter
into production, but are necessary for production process, usually these supplies are small
part of inventory and do not involve significant investment. Therefore a sophisticated
system of inventory control may not be maintained for them.
2 (a) Need for holding inventory:
There are generally three major motives for holding inventories.

18
 There transactions motive which emphasis the need to maintain inventories to
facilitate smooth production and sale operations.

The precautionary motive, which necessitates holding of inventories to guard

against the risk of unpredictable changes in demand and supply forces and other factors.

The speculative motive which includes the decision to increase or reduce inventory levels
to take advantage of price fluctuations.

A company should maintain adequate stock of material, as it is not possible for a

company to procure raw material whenever it is needed and also for a continuous and
smooth and uninterrupted production process.

2(b) Inventory management techniques:

In managing inventories the firm should determine the optimum level of inventory.
Efficiently controlled inventories make the firm flexible. Inefficient inventory control
results in unbalanced inventory and inflexibility, the firm may be sometimes out of stock
and sometimes may pile up unnecessary stocks. This increases the level of investment and
makes the firm unprofitable.

To manage inventories efficiently and effectively answers should to the following

two questions? How much should be ordered? When should it be ordered?

The first question, how much to order, related in the problem of determining
economic order quantity (EOQ) and is answered with an analysis of costs of maintaining
certain level of inventories. The second question when to order arises because of
uncertainty and is a problem of determining the re-order point.

19
3. Management of Receivables:
Accounts receivable or trade credit is the most prominent force of the modern
business. It is considered as an essential marketable tool, acting as a bridge for the
movement of goods through production and distribution stages to customers finally. A firm
grants credit to protect its sales from the competitor and to attract potential customers.
Trade credit, thus credit receivable or book debts, which the firm is expected to, collect in
future. It also involved an element of risk as the cash payment has get to be received, hence
they has to be carefully analyzed.
Receivables constitute a substantial portion of current assets of several firms. They
form about 1/3 part of current assets in India. As substantial amounts are tied up in trade
debtors, it needs careful analysis and proper management, for proper management of
receivable a concern must adopt an optimum credit policy.

20
 CHAPTER 2
REVIEW OF LITERATURE

1. 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.
2. 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 analysed 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.
1. Virani Varsha (2008) has conducted a comparative analysis of CADILA
healthcare with the following objectives: 1. To evaluate the financial performance
2. To examine the profitability trend

3. To ascertain the assets utilization pattern and evaluate liquidity position of the
company.
The author has used two sophisticated analytical tools for the analysis i.e. ratio
analysis and correlation analysis. The correlation between various ratios is depicted
in the study. It is observed that in most of the cases, correlation coefficient is near to
1. Hence, it can be said that there is a high degree of positive and negative
correlation between most of the ratios.
4. Ramudu Janaki P. and Rao Durga S. (2008) attempt to analyze both concept and
research based studies.

21
 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.
5. 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.
6. 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 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.
7. 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.

22
 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.

8. 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.
9. Ramachandran Azhagaiah and Janakiraman 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, 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.
10. 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.
23
11. Uyar Ali (2009) examines the relationship of cash conversion cycle with firm size
and profitability of the corporations listed in the Istanbul Stock Exchange (ISE) for
the year 2007. The following are the objectives of the study:
1. To set industry benchmarks for cash conversion cycle (CCC) of merchandising
and manufacturing companies,
2. To examine the relationship between the length of the CCC and the size of the
firms, and
3. To study the length of the CCC and profitability.
4. It was observed that the retail/wholesale industry showed shorter CCC than thes.

24
 CHAPTER - 3
RESEARCH METHODOLOGY

3.1 RESEARCH METHODOLOGY :

The system of collecting data for research projects is known as research methodology .it
is a way to systematically solve the research problems it is necessary to researcher to know
not only the research method techniques but also the methodology .

Primary data : data observed or collected directly from firsthand experience is called
primary data .the primary data was collected mainly with interactions and discussions with
the company‟s executives .
Secondary data : published data and the data collected in the past by other parties is
called secondary data .
Sources of secondary data :
1.Financial statements 2.News
papers 3.www.swarajtractors.com

Statement of the problem:

Working capital is an important aspect of financial management. It plays an

essential role in organizations financial success. The nature of such working capital is very
liquid. Valuation of working capital elements like cash, debtors, stock and creditors itself
is a difficult task for any organization. So there arises a requirement for assessing working
capital requirements, monitoring and managing it, from time to time for greater efficiencies.

3.2 Need for the study:

The tractor production serves as the index of the economic development of any
country. Thus tractor production is very vital from country‟s agriculture‟s point of view.
The demand would be growing with increasing technologies and is likely to reach a
staggering level in the decades to come.

25
 On the other hand, the price of tractors has remained stagnant, because prices are
determined by market forces and presently production levels are greater than supply.

A number of industries for the past few years have been finding it difficult to solve
the increasing problems of adopting seriously the management of working capital. Business
concerns intent on developing their business have to use to the utmost, their available
resources for the improvement and development of the business, there by enabling them
profits.

Due to inflationary situation and restrictions imposed on borrowing facility, the

commercial institutions and manufacturing industrial units have been confronting
innumerable difficulties in meeting day-to-day financial needs. Hence effective
management of working capital has become a problem for such organizations and
industries. The purpose of study is to examine, analyze and evaluate working capital
management and its components in swaraj tractors.

3.3 Scope And Period Of The Study:

The scope of the study is defined below in terms of concepts adopted and period
under focus.
First, the study “management of working capital” i.e. “gross” and “net” are used in
measuring profitability and liquidity respectively and also to arrive at various objectives of
the study.
Secondly, the study is based on the annual reports of the company for a period of
five years from 2014-15 to 2018-19 (so we study 2015, 2016, 2017, 2018, 2019).

3.4 Objectives Of The Study:

 To study the statement of changes in working capital.

 To analyze the profitability-liquidity position of the company.
 To examine and evaluate the cash, receivables and inventory management
perform

26
RESEARCH METHODOLOGY
Research means a scientific systematic research for pertinent information on a
specific topic. It is a concept or symbol for the purpose journalizing to extend correct or
verify knowledge aids in construction of theory or in the practice of an art.

The data used for the analysis and interpretation is from annual reports of the
company i.e., secondary forms of data. Ratio analysis is used for calculation purpose. The
project is presented using tables, graphs and with their interpretations. No survey is
undertaken or observation study is conducted by evaluating fixed assets performance of the
company.

SOURCES OF DATA:
The data needed for this project is collected from the following sources:
1. The data is adopted purely from secondary sources.
2. The theoretical contents are gathered purely from eminent text books and
references.
3. The financial data and information is gathered from annual reports of the company.

The study of Working Capital management is based on primary as well as secondary data.

SECONDARY DATA:

 The secondary data was collected from company‟s annual reports from 2015-2019,
various books and through Internet.

27
Tools for analysis:
To analyze the data acquired from the secondary sources the following tools are
used:
 Statement of changes in working capital.
 Ratio analysis.

3.5 Limitations:

 As most of the financial information was considered confidential, the access to the
information was restricted.
 The results of the study are limited to the available information.
 Due to frequent camps and workload of the staff in the organization much time
could not be spared by them for the project.
 The project is based mainly on secondary sources of information.

28
 CHAPTER -4
INDUSTRY AND COMPANY PROFILE
4.1 INDUSTRY PROFILE
Introduction:
INDIAN TRACTOR INDUSTRY

THE BEGINNING: Indian Tractor Industry took birth in 1959-60 when the first tractor
manufacturing unit was established. However, this industry found a firm footing only after
the turbulent period of 1968-74, during which the acceleration which should have emerged
from the upsurge in demand generated by the Green Revolution was navigated by large-
scale imports of fully built tractors. By 1973-74 when imports were banned, 22
manufacturers remained. It is in an environment of intense competition between 22
manufacturers that our tractor industry has grown during the last 30 years. During this
period, it has become not only a major segment of our engineering industry but with a
population of 1, 30,000 tractors in 1990, our country became the second largest tractor
producer in the world.

The development of tractors industry from the very beginning i.e. 1959-60 Till date can be
divided into the following four phases:-

1. First phase of development (1959-68):

In late sixties demand for tractors was low. After 1967, demand of tractors started
multiplying at an annual rate of nearly 50% because government policies in respect of the
development of tractor industry to promote mechanization of agriculture encouraging local
manufacturer of tractors along with the import of tractors from Eastern Europe. At the same
time, government protected the interests of the farmers by making tractors available to them
at reasonable prices. Tractors manufacturing units came up in this decade:
Escher Tractors Ltd. (1959)
Tractors and Farm Equipment Ltd. (1963)
Tractors and Builders Ltd. (1964)
International Tractors Ltd. (1965)

29
2. Second phase of development:

The government‟s decision to freely invite new entrepreneurs to tractor manufacture in

1968 backed by Green Revolution, led to the establishment of six more units in this
industry. They were:
Escorts Tractors Ltd. (1971)
Hindustan Machine Tools Ltd.
(1971) Kirloskar Tractors Ltd. (1974)
Punjab Tractors Ltd. (1974)
Pittie tractors Ltd. (1974)
Harsha Tractors. Ltd. (1975)
The combined output of 11 units has risen to 32,000 by 1975. Government de-licensed
the tractor industry in 1968 and then banned import of fully built tractors in 1974. There
was expansion in rural branches of banks and rural lending increased. The pace of
irrigation facilities also increased and government extended full support to old and new
manufacturers to speedily establish them.

3. Third phase of development:

Banning of imports and increased competition due to increase in number of tractor

manufacturers led to the growth in local production. The boom in the tractor industry in the
late seventies led to the setting up of two more units for the manufacture of tractors. These
were:
Auto Tractors Ltd. (a U.P. Government enterprise) (1981)
Partap Steel Rolling Mills Ltd. (Tractor Division) (1983)
The tractor industry saw a rapid growth of 6% from 1982-87.

4. Fourth Phase of development:

After 1987 the tractor industry further picked up Government gave priority to agriculture
and exempt the excise duty on tractors below 1800cc in 1986 and repayment period was
increased from 7 to 9 years. After this, average growth of 15% was experienced for 1988-
92 which was due to green revolution.

30
After six years (1987-92) of rapid growth, demand for tractors showed a decline of 4% in
1992-93 and 3.8% in 1994-95. Sales dropped from 1.51 lacs in 1991-92 to 1.38 lacs in
1993-94. The decline was due to the following factors:- Land development bank, an
important source of finance, collapsed. Depression in market due to credit squeeze.
Decrease in production of cash crops. Political uncertainty.
But after that tractor industry again started growing and tractor sales went to 1.64
lacs in 1995 and further in 1996-97.

THE PRESENT

Sales peaked to 2.73 lacs in 1999-2000. In the year 2000-01 and 2001-02 the sales
decline to 2.53 and 2.18 lacs because of fall in the rural income virtually all over country
and due to rising competition. It reached 1.69 lacs in 2002-03. The industry saw an -upward
trend volume touching 4 lacs in 2016-17 and to 4.46 lacs in 2017-18 During the current
FY 2016-17 , around 4,50,000 tractors were sold in India and 100000 tractors were
exported.
The industry has now discovered channel-exports to ensure that the sales of tractors do not
drop. In fact, exports have now become a thrust area.
Five major manufacturers are in the race for tractor market today, account for 78% of the
total market share. They are offering products of different HP‟s. They include below 20HP,
21-30HP, and 41-50HP and above.

CRITICAL PARAMENTERS FOR GROWTH OF TRACTOR INDUSTRY

* AGRICULTURE INDUSTRY
Nearly 90-95% tractors are purchased with the help of bank credit. It plays an important
role in determining the demand for tractors.

31
* PRICING OF TRACTORS.
The financial inability of the Indian farmers makes the pricing a critical parameter.
Companies that managed to keep their costs low are the ones that managed to survive
during the reversionary period.

* MONSOONS AND CROP PRICES.

The farmers have to pay 15% of the total price of the tractor, in cash, at the booking stage;
consequently, if the farmer is faced with bad monsoons and low crop prices, he will not be
able to make the initial down payments.

* GOVERNMET POLICIES
To enable a farmer to purchase a tractor against these odds, the government introduced
subsidies in this sector. In the budget of 2004 all the tractors were exempted from excise
duty.

* IMPORTS
The industry reduce its dependence on imports, they have indigenized their inputs, which
were earlier imported and priority is given to Research and Development. All tractor
manufacturing units, except the Swaraj Division, were initially set up with foreign
collaboration, tractor industry has been on its own for the last decade.

* WIDENING RANGE FOR CUSTOMER CHOICE

Competition in tractor industry led to increase in the variety of models for farmers to
choose from. Industry today offers more than 43 models, and special variants to suit
regional needs and special usage are often available in many models.

32
 TRACTOR MARKET – A CYCLICAL TREND

Table below provides the industry picture for 2015-16 geographically &
segment wise:
GEOGRAPHICALLY

Territory %age of Domestic Sales

North (Punjab, Haryana & Uttar Pradesh) 29%

Central (Madhya Pradesh & Rajasthan) 18%

East (Bihar, West Bengal, Orissa & Assam) 9%

West (Gujarat & Maharashtra) 18%

South (Andhra Pradesh, Tamil Nadu, Karnataka & Kerala) 26%

SEGMENT WISE

HP Range %age of Domestic Sales

Up to 30 HP 18%

31 - 40 HP 37%

Above 40 HP 45%

33
4.2 COMPANY PROFILE
SWARAJ MAZDA- AN INTRODUCTION:

Swaraj Mazda Limited is a joint venture of Punjab Tractors limited and Mazda
Motors Limited of Japan. The agreement between the two was signed on 5th October 1984.
As has been pointed out that Swaraj Mazda is a collaboration entity between two giants in
their own rights, is committed to quality and performance and is progressively showing
profound concerns for the welfare & benefits of their customers, stock holders, business
partners and staff. After the first indigenous tractor, manufactured by PTL in India, was
successfully launched in 1974, it has been on its way to becoming a blue chip company.
Besides tractors, the company also manufactures Swaraj Combine Harvesters, Agricultural
Implements. Automotive Castings, Forklifts. Over the year, PTL has won national and
international acclaim and recognition for outstanding performance and contribution in
many diverse fields. MOREOVER PTL WAS RATED AS THE BEST COMPANY OF
THE YEAR 1989 BY FINANCIAL EXPRESS.

Mazda Motors Corporation of Japan, established in 1920 is an enterprise of

international repute. Mazda started manufacturing trucks as back in 1931. Today, this
enterprise has the distinction of being the only company in the world producing
reciprocating petrol and diesel engines as well as the revolutionary rotary engines. Mazda
is ever seeking the new areas of product excellence and innovations. It adheres audaciously
to a 2000 checkpoints inspection before declaring any vehicle road worthy. The use of
robots, latest technology, and world-class production facilities enables Mazda to produce
vehicle of outstanding quality and performance. No wonder Mazda has won
Appreciation all over the world for quality products that are rolling out of its plants.

The factory Swaraj Mazda Limited is located at Village Asron district Nawanshahar
(Punjab) near the city of Ropar and at a distance of 45 km from the capital city of
Chandigarh. The plant has captivating site. It spreads over a quaint, sprawling 100 acres of
land ringed by Shivalik Hills on three of its sides and river Satluj on the other. The desolate
slit hill has been leveled for construction.

34
 Work at the plant began at a great tempo and the first vehicle rolled out of the
production line in a record time of one year of laying the foundation stone.
The LCV are manufactured in five attractive colours- Santos Red, Nile blue, Light
Beige, White and Golden Yellow. In addition to these, any other colours can be made on
demand. Swaraj Mazda vehicles are not only strong but also fuel-efficient.

Prominent among the load carriers Swaraj Mazda is also manufacturing:-

1. 4 wheel drives;
2. Extended wheel- base long- chassis Mini Buses which carry up to 44 passengers.
3. Deluxe Buses carrying to 40 passengers;
4. Ambulances
5. Mobile Reverse- Osmosis and Electro dialysis Units for the Central Salt and Mineral
Chemical Research Institute.
6. CNG Buses with Safety & Eco grades.
7. Integrated Garbage collection and disposal system for urban centers;
8. Hydraulically operated dumpers;
9. Mobile fair priced vans;
10. Sky Lift Vehicles

Swaraj Mazda gives due attention to the marketing part and the employees are highly
qualified and trained to fit the job. Swaraj Mazda has a vast
Network of 150 dealers spread throughout the country including A&N Islands. Zonal
offices have been opened in Chandigarh, Lucknow, Ahmedabad, Mumbai, and Chennai.
This helps substantially in sales promotion, Export promotion, especially for Hi-tech
products, is also being emphasized.
Discipline and its rigid enforcement without discrimination is an important Hallmark of
Swaraj Mazda. It is of great significance in evolving work culture. All the employees,
irrespective of their position and status have to punch their cards when they report for duty.
As a result, strict punctuality has become a way of life and work with them.

To ensure Industrial peace, i.e. absence of strikes and lockouts, Swaraj Mazda
believes in making a contended labour force with a very low rate of absenteeism and
turnover. Reasonably fair wages and various perks like subsides uniform and transport,
mess facilities go a long way in creating identification with the job. Earnestness, Sincerity

35
and Spirit of corporation pervades the entire atmosphere of the company.

The happy absence of Industrial dispute in the enterprise speaks volume for the
success of the firm and cultivation of work culture.
Work culture or work ethos is given very high precedence. It is fully recognized that the
objectives of the concern- higher and higher production, productivity and indigenization
can be attained through commitment into commonness of „GOAL‟ in each and every
member of the Swaraj family. The entire planning is undertaken in such a way so as to
inculcate the spirit of dedication in each member, whether he is skilled or semi-skilled
worker or belongs to the managerial cadre. Many effective steps are taken to bring this
about. Important amongst them are:
1. Common canteen and mess for all. Same meals are served to all and in identical utensils.
Everybody has to stand in a queue to get his or her meals.
2. Common uniform is there for all the members irrespective of their status.
3. No separate cabins for the members of higher hierarchy. All the members of a department
or a section therefore sit and work in one hall with the Manger facing the staff. Every
employee carries his or her files, thus inculcating the spirit of dignity of labour in the staff.

HISTORY OF SWARAJ MAZDA

History of the SWARAJ MAZDA LIMITED (Light Commercial Vehicle) dates back

to as in 1975 when the first efforts were initiated by the Punjab State Industrial development
Corporation Limited (PSIDC) to obtain a letter of intent from the Government of India. The
Govt. of India was interested in installing the unit and issuing the license for an LCV in
order to save the fuel consumption in the economy. Therefore Govt. decided to installed
indo-Jap LCV units in 3 states – Punjab, U.P. & M.P.

The contribution of PSIDC was twofold; firstly in obtaining the letter of intent in 1981 and
subsequently for transferring the same in favour of the Company in 1983. These moves
reflected the thinking in the Punjab Govt. and the PSIDC, that Punjab Tractors Limited
(PTL) would implement this project taking full advantage of PTL‟s position, experience,
expertise and resources both financial and managerial.
It was in this background that PTL entrusted with the responsibility for the LCV project,
went ahead promotion of Swaraj Vehicles Limited in July, 1983.
Punjab Tractors Limited and its brand name “Swaraj” were well known on the Indian
corporate and engineering horizon.
36
They were proven symbols of Indian Engineering fully competitive against collaboration
based technology and foreign brand names. PTL‟ track record during the period of its
existence is often cited as an example of dedicated and sustained corporate endeavour and
organization value system, financial performance and systematic growth, team building
perception and response to changing market needs and resilience against difficulty
The project in its concept, aims at breaking new ground not only in terms of product and
production technology, but also in building a new culture and value system in the
organisation, which enables it to move forward with confidence into the era of competitive
markets. This guiding philosophy is dictating every facet of project implementation both in
physical facilities and the human side.

Swaraj Mazda Board Of Director

Director Name Designation
S K Tuteja Chairman
Yash paul Mahajan Managing Director
Y Watanabe Whole-time Director
R P Sehgal Whole-time Director
E Seto Director

Harkirat Singh Director

T Hashimoto Director
H Yamaguchi Director
M Tabuchi Director
P K Nandy Director
A K Thakur Director
Pankaj Bajaj Director
Steven Enderby Director
Company Secretary
Gopal Bansal

37
REPORT OF THE DIRECTORS

The Directors present their Twenty Sixth Annual Report together with Audited Accounts
for the financial Year ended 31st March, 2012. PERFORMANCE REVIEW As anticipated
in last year‟s Report, the fiscal year 2017-18 saw steady improvement in the operations of
the Company, particularly from October, 2011, in common with the positive changes in the
overall commercial vehicle industry in the country. Happily, the improvement in the money
supply situation was even better than expected giving a boost to demand for commercial
vehicles (CV). While CV sales in the first half at 2,38,000 were low, the second half saw
accelerated demand and sales achieved were at a robust level of 3,38,400. Consequently,
total industry sales for the year at 5,76,000 (4,27,000) were an all time high. The
Company‟s performance reflected that growth with sales rising to 10,133 vehicles from
8,020 in 2018-19 , giving operating revenue of Rs. 722.23 crores (Rs. 546.95 crores).
Demand for the Company‟s ultra luxury buses saw only marginal improvement from last
year: market penetration has proven difficult even though new products – two air-
conditioned buses on Isuzu platform and one on Mazda chassis - were well received.
Having regard to the slack demand for new products, capital spending in the year on the
Expansion Project was restricted to bare minimum, at Rs. 2.87 crores. The Directors
continue to believe that these products will achieve the sale volumes forecast in that Project.

A noteworthy feature of the Year‟s performance was highly successful efforts on collection
of receivables, at Rs 878 crores, the highest in recent years, thereby achieving the stringent
targeted levels of dealer dues. Operating Profit at Rs 57.93 crores (Rs 28.06 crores) was
gained from the increase in volume of sales, enhanced by a planned judicious product-mix,
timely restructuring of vehicle prices and close vigil on expenditure. It is in the above
background that the Directors report the following summary of results for the year 2018-
19 .

38
 PRICE QUALITY

MOTTO OF
M & M SWARAJ
DIVISION

SERVICE

PROMOTION OF SWARAJ

M&M LTD -Swaraj Division (SWARAJ DIVISION) was joint sector company of the
Punjab Government, which went into commercial promotion in the early seventies. It is
promoted by Punjab State Industrial Development Corporation (PSIDC) in 1974 which was
set up by Punjab Government for setting up new projects.
In 1965 when the entire industrial growth of India relied upon foreign technology and
know-how for setting up industrial ventures in India, the Central Mechanical Engineering
Research Institute (CMERI, Durgapur), a national Laboratory of the Government of
India, took the bold step of taking up the design and development of totally Indian know
how for 26.5 H.P. agricultural tractors.

39
EMERGING MARKETS
Swaraj Domestic territorial market share for 2017-18 dealer networks at the year – end
emerges as:
DOMESTIC TERRITORIAL MARKET SHARE AND DEALER NETWORK (YEAREND)

Territory Swaraj No. of

Market Dealers as on
Share 31-03-15

North (Punjab, Haryana & Uttar Pradesh) 10.1% 203

Central (Madhya Pradesh & Rajasthan) 4.9% 114

East (Bihar, West Bengal, Orissa & Assam) 8.3% 68

West (Gujarat & Maharashtra)

11.7% 88
South (Andhra Pradesh, Tamil Nadu, Karnataka &
Kerala)
9.3% 93
Total 9.1% 566

SEGMENTWISE

HP Range No. of %age of Swaraj Share

Models Swaraj Sales in Segment

Up to 30 HP 5 17% 9%

31 - 40 HP 1 50% 12%

3
Above 40 HP 33% 7%

40
 “CORE BELIEFS”

1. WE HAVE A LONG – STANDING RELATIONSHIP WITH THE FARM &

FARMING COMMUNITY THE NATIONAL HERTAGE AS WELL AS THE
NATIONAL AGENDA, WHICH PROVIDES US WITH IMMENSE GROWTH
OPPORTUNITES.

2. OUR STRENGTH IS THE INVOLVEMENT OF OUR PEOPLE, TEAM SPIRIT, AND

THEIR INTEGRITY ABIDING LOYALITY & LIFE TIME COMMITMENT TO THE
SWARAJ ENTERPRISE.

3. WE SEEK COPRPORATE EXCELLENCE AND PROFITS THROUGH ETHICS

PASSION AND PERSERVERANCE.

4. WE CONSIDER OUTSELVES CUSTODIANS AND TRUSTERS OF ALL OUR

CONSTITUENCIES – OUR CUSTOMERS, EMPLOYEES, BUSINESS ASSOCIATES,

41
SHAREHOLERDRS AND SOCITY AND PURSUE THE RESPONSIBILITY ROR
CREATION OF WEALTH FOR THEM WITH MISSIONARY ZEAL.

MAHINDRA &MAHINDRA LIMITED

SWARAJ DIVISION

BOARD OF DIRECTORS
 P.D. NARANG (Chairman)
 S.K. TUTEJA
 DONALD PECK
 STEVEN ENDERBY
 N. MOHANRAJ
 M. RAGHAVENDRA
 HARDEEP SINGH
 DALJIT MIRCHANDANI
 P. SIVARAM (Chief Operating Officer)
 A.M. SAWHNEY (Director – Marketing)

MEMBERS OF THE EXECUTIVE BOARD

 P.L. SHARMA
 R.K. MANRAO
 P.K. NANDA

BACKGROUND

M&M LTD -Swaraj Division plant is situated at S.A.S. Nagar (Mohali) where production
commenced in the year 1974. Initially, PSIDC contributed 42% equity capital against the
total paid up capital of Rs.140.00 lacs. The facility was initially created to manufacture
5000 nos., tractors and the capital cost at that time was Rs.321 lacs.

The production capacity of tractors has increased to 60000 nos., from the level of 5000 nos.
The company, over the years, has also promoted two companies, namely, Swaraj Mazda

42
Limited (manufacture of Light Commercial Vehicles) & Swaraj Engines Ltd. (manufacture
of Diesel Engines in collaboration with Kirloskar Ltd and it has also promoted Swaraj
Automotives. The present stake of SWARAJ DIVISION in these is 14% in Swaraj Mazda,
33% in Swaraj Engines and 24% in Swaraj Automotives.

MISSION, VISION & OBJECTIVES

43
 OBJECTIVES OF SWARAJ
1) QUALITY
a. Continually improves satisfaction level of our customers.
b. Continually improve performance & reliability of our products &
services
c. Provide to you delivery of products & services to meet customers
requirements.
d. To reduce the break down of equipment.
2) ENVIRONMENT, HEALTH AND SAFETY.

a. Control and reduce emission & discharge in the company

b. Optimum Utilization of natural resources
c. Control & Reduce accidents and provide Safety to the employees
working in the organization.
3) PEOPLE‟S EXCELLENCE.

a. Continually improve Education and Training to employees and

their overall development.

SWARAJ DIVISION: BRAND NAME „SWARAJ”

The word SWARAJ in Indian language means „freedom from bondage‟. Since SWARAJ
DIVISION was the first large scale project in India based totally on Indian know how and
technology, Swaraj was appropriately chosen as its brand name. With more than 5 Lac
tractors and harvest combines operating in Indian farms, now Swaraj is also an
internationally recognized name in the developing world Viz. East Africa, West Africa,
Middle East and South East Asia, etc.

44
SWARAJ - STAGES OF GROWTH

PERIOD (1970-74)
This project for manufacture of 5000 tractors per year was set up at an outlay of Rs.

3.70 crores during November 1972- March 1974. The engineers for Swaraj tractors were

procured from M/s Kirloskar Oil Engines Ltd., a pioneer in Indian Engineering Industry.

SWARAJ DIVISION went into commercial production with the introduction of its first

Model Swaraj 724 in April 1974.

PERIOD (1974-78)

In 1974 competitive market conditions prevailing where well known international

brands such as Ford, Massey, Ferguson, etc were available, it was difficult to establish a
new tractor. Thus to establish Swaraj against this severe competition, the following strategy
was adopted.
Intensive and close marketing.

District - wise distribution.

Limited introduction and slow extension of distribution network.

SWARAJ DIVISION‟s own serving group.

Strict uniformity of product performance and quality.

SWARAJ DIVISION‟s first launch SWARAJ 724 received quite favorable response and
encouraged by this response and also by taking into account the preference of large
segments of farmers for higher HP tractor, development work on a 35 HP tractor was started
in January 1975. SWARAJ DIVISION introduced its second model SWARAJ 735 in
November 1975 which is now the most popular tractor. Then a low cost tractor SWARAJ
720 was introduced in 1978 for small farmers.

45
1. THE EXPANSIONS (1978-82)
SWARAJ DIVISION started growing and increased its production capacity to 12,000
tractors at a capital outlay of Rs. 9.2 crores. During this time SWARAJ DIVISION became
multi-divisional by installing Swaraj Foundry Division for manufacturing castings. This
division started supplying casting to SWARAJ DIVISION in 1980. In 1983, SWARAJ
DIVISION introduced SWARAJ 855 and became the first manufacturing organization to
have the widest product range.

2. BREAK PERIOD (1982-86)

With encouraging past records PTL decided to increase its production to 24000 per annum.
But the RBI‟s credit squeeze policy affected the tractor industry, as more than 95% of the
tractor sales are through banks. SWARAJ DIVISION‟s sale dipped from 10000 tractors to
around 5500 tractors in 1982-83. During 1982-86, SWARAJ DIVISION‟s efforts were
directed towards training its work force, reducing wastage, cutting down scrap, inventory
control, up gradation of quality, expanding dealer network in new areas and widening
product variants. Thus SWARAJ DIVISION worked on „man‟ rather than „machines‟

STAGE OF GROWTH SINCE 1987

There is goodwill create in the mind of the people regarding brand SWARAJ, market since
1987 has been showing growth trend. The demand for Swaraj has increased tremendously.
Now consumers are ready to wait and pay the entire amount in advance to buy a Swaraj
tractor rather than buying any other tractor. Production capacity had increased presently to
33000 tractors per year and will further increase to 36000 tractors per year by 2000.

THE DECADE OF NINETIES

The decade of 90‟s has been a rewarding one for all the constituents of Swaraj enterprise -
through generation of wealth for its customers, its business associates, its employees, its
shareholders and the society.

 Nomination by the Economic Times - „best company of the year 1998‟.

 Listed by FII in „the jewels of Asia‟ category 1999.
 Nomination of UTI institute of Capital Markets for excellence in corporate

46
governance.
 Listed by Hong Kong based „Asia Money‟ among top 5 best managed
companies in India 1999.
 Listed by “Business Today‟ among top 3 Economics value generators in India.

Evolving Journey of SWARAJ DIVISION

1965 Govt. of India's research institute (CMERI) at Durgapur initiates design and

development of SWARAJ tractor based on indigenous know-how.

1970 Punjab Govt. through PSIDC acquires SWARAJ tractor's design from
CMERI and establishes Punjab Tractors Ltd. (SWARAJ DIVISION) for its
commercialization.
1971- SWARAJ DIVISION sets up SWARAJ Project for 5,000 tractors per annum

73 at a capital outlay of Rs. 37.0 million with an equity base of Rs 11.0 million.
1974 Swaraj 724 (26.5 HP) tractor commercially introduced.
1975 2nd tractor model SWARAJ 735(39 HP) developed by own R&D,

commercially introduced.
1978 3rd Tractor model SWARAJ 720 (19.5 HP) developed by own R&D,
commercially introduced.

Maiden equity divided declared.

1980 Guided by social concerns and responsibility, SWARAJ DIVISION takes
over PSIDC's sick scooters unit - Punjab Scooters Ltd. (subsequently renamed
as SWARAJ Automotives Ltd.)

India's first Self propelled Harvester Combine - SWARAJ 8100 developed by

own R&D, commercially introduced.

SWARAJ Foundry Division set up in Backward area.

1981 Issue of maiden Bonus Shares (2:5), paid-up equity moves to Rs 15.4 million.

47
1983 4th Tractor Model - SWARAJ 855 (55 HP) developed by own R&D,
commercially introduced.

Expansion of annual capacity to 12,000 tractors per annum at Plant 1.

1984 SWARAJ MAZDA Ltd. promoted in technical and financial collaboration
with Mazda Motor Corpn. & Sumitomo Corpn. Japan for manufacture of
Light Commercial Vehicles. SWARAJ DIVISION's equity participation is Rs.
30.4 million (29%) and that of Mazda and Sumitomo's Rs. 27.0 million
(26%).

1985 SWARAJ Industrial Forklift Trucks developed by own R&D, commercially

introduced.

1986 SWARAJ ENGINES Ltd. promoted in technical and financial collaboration

with Kirloskar Oil Engines Ltd.(KOEL) for manufacture of diesel engines.
SWARAJ DIVISION's equity participation is Rs. 6.9 million (33%) and that
of KOEL's Rs 3.6 million (17%).
1989 1st Right Issue (1:1) at a premium of Rs 50/- per share (plus reservation of
200 Shares per employee) paid up equity moves to Rs 31.6 million.

1990 2nd Right Issues (1:2) at a premium of Rs 60/- per share (plus reservation of
200 Shares per employee) paid-up equity moves to Rs 50.6 million.

1992 2nd issue of Bonus Shares (1:1) paid up capital moves to Rs. 101.2 million.

1993 Annual tractor capacity expanded to 24,000 per annum at Plant 1.

1995 Setup of tractor Plant II at Village Chappercheri with annual capacity of

12,000 per annum.

48
1996 3rd issue of Bonus Shares (1:1), paid up equity moves to Rs. 202.5 million.

1998 Commencement of expansion to 60,000 tractors (30,000 at each plant).

Capital outlay of Rs 1000 million, funded mainly through internal accruals.

1999 5th and 6th tractor models - SWARAJ 733 (34 HP) & SWARAJ 744 (48 HP)
developed by own R&D, commercially introduced.

FY 1999's divided @ 250% was corporate India's highest.

2000 Expansion of annual tractor capacity to 60,000 completed.

4th issue of Bonus Shares (2:1) paid up equity moves to Rs 607.6 million.
2001 SWARAJ DIVISION won National Championship trophy in competition
organized by All India Management Association (AIMA) for young managers.

Economic times and Boston Consulting Group selects SWARAJ DIVISION as

one of the India's finest 10 companies out of Economic times top 500
Companies.
2002 Cumulative tractor sales crosses 5, 00,000.

2003 PSIDC's disinvestment of its entire Equity holding (23.49%) in SWARAJ

DIVISION in favor of CDC Financial Services (Mauritius) Ltd. With this, total
holding of CDC & its associates in SWARAJ DIVISION stands at
28.48%.
2004 7th & 8th tractor models - Swaraj 939 (41 HP) & Swarj 834 (34 HP)
developed by own R&D, commercially introduced.

2005 SWARAJ DIVISION disinvested 15,73,000 equity shares of Rs. 10/- each of
Swaraj Mazda Ltd. (constituting approx. 15% of SML's paid up capital) in
favor of Sumitomo Corporation, Japan, a joint venture partner in Swaraj
Mazda Ltd. at a total consideration of Rs. 629.2 million

49
2007 CDC/Actis Group and Burman Family's disinvestment of their Equity holding
in SWARAJ DIVISION (43.3%) in favor of Mahindra Group (M&M).
M&M made open offer to shareholders for another 20% equity of the
Company.
Mahindra Group's equity holding in the Company stands at 64.6% Cumulative
Tractor Sales cross 600,000.
Swaraj Track Type Combine designed and developed by in-house R&D,
commercially launched

50
 ASSOCIATE UNITS OF SWARAJ DIVISION

1. SWARAJ FOUNDARY DIVISION:

It was established in 1980 at a capital outlay of Rs. 1.80 crores to provide grey iron

castings to SWARAJ DIVISION. Initial production was 5000 MT/year. It is situated in

village Majari in Ropar district. In FY 2007-08, production of castings was 9,600 Metric

Tonnes, representing a value of nearly Rs. 50.5 crores.

2. SWARAJ COMBINE DIVISION:

Punjab government requested SWARAJ DIVISION for the development and manufacture

of self propelled Harvester combines to curtail the harvesting season and save the crops

from natural calamities. As a result Swaraj Combine Division was set up in 1980 at

Chappercheri to produce 250 combines per annum at an initial investment of Rs. 2.65

crores. In 1981, first SWARAJ 8100 rolled out. In 1985, production of diesel fork lift also

started in collaboration with KOMATSU Fork- Lift Company of Japan. Over last 28

years, the company has sold nearly 3,150 combines including 65 in 2007-08.

SWARAJ
DIVISION

PLANT- 1 PLANT – 2 PLANT -3

51
 CHAPTER – 5
DATA ANALYSIS & INTERPRETATION
SWOT ANALYSIS
`
STRENGTHS:
The company has an excellent distribution network. Due to strong consumer preference
and the potential for expansion, the industry in bound to record growth. The company
mainly has medium horse power tractor in its product portfolio, which holds a good growth
potential thereby leading to an increase in the market share. Strong Research and
development set up. Being a cash rich company, SWARAJ DIVISION should have no
obstacle for further expansions.

WEAKNESSES
Being agro-based product, company‟s fortune depends on the vagaries of the monsoon. The
company is addressing this problem by going in for capacity expansion and increasing
dealer network. The company has not leveraged its brand and product varies in the exports
market. Major market share in Punjab & Haryana could stagnate as the market mature.

OPPORTUNITIES:
The Company will have the advantage to synergize with M & M, Farm Equipment Sector
in the areas of sourcing, manufacturing, product development and distribution. Increased
agri-focus of the Indian Government. Good brand name, product quality and cost advantage
to increase exports in low value markets of Sri Lanka, Bangladesh and African countries.

THREATS:
The entry of international and new domestic players would intensify competition
significantly. This could put pressure on the sale growth and the merging of the company.
Number of technically superior new models likely to be launched in the market in the next
two years. The evitable increase in petroleum prices including diesel & other inputs, will
naturally bring down the spirit of a prospective tractor purchasers.

52
 DATA ANALYSIS

Components of working capital during the period 2014-15 to 2018-19

Particulars 2014-15 2015-16 2016-17 2017-18 2018-19

A) Current Assets
Inventory 2,77,88,120 92,48,773 2,23,06,584 79,54,977 1,78,23,396
Sundry Debtors 2,10,20,651.10 3,26,57,425.39 2,83,80,062.46 6,24,34,864.64 5,35,87,898.08
Cash & Bank 1,26,80,162.10 4,12,017.87 4,89,987.94 10,30,357.33 12,75,758.21
Other Current Assets 66,17,386.77 1,97,21,730.74 85,29,097 96,83,354 1,20,68,081

Total Current Assets(1) 6,81,06,320 6,20,39,947 5,97,05,731.40 8,11,03,552.97

B) Current Liabilities
Sundry Creditors 3,54,94,571.72 1,58,05,553 88,76,129.86 1,01,04,429.37 90,20,956.63

Total Current Liabilities(2) 3,54,94,571.72 1,58,05,553 88,76,129.86 1,01,04,429.37 90,20,956.63

Net Working Capital(1-2) 3,26,11,748.28 4,62,34,394 5,08,29,601.53 7,09,99,123.60 7,57,34,176.66

Analysis:
From the above table it is clear that the net working capital has been increasing
during the above years of study period. In the year 2014-15 it is Rs.3,26,11,748.28 and it
has increased to Rs.7,57,34,176.66 in the year 2018-19.

53
 Statement showing the changes in Working capital for the year 2014-15
and 2015-16

Particulars 31/3/15 31/3/16 Increase Decrease

A) Current Assets
Inventory 2,77,88,120 92,48,773 ----- 1,85,39,347
--
Sundry Debtors 2,10,20,651.10 3,26,57,425.39 1,16,36,774.26 -----
--
Cash & Bank 1,26,80,162.10 4,12,017.87 -------- 1,22,68,144.23
Other Current Assets 66,17,386.77 1,97,21,730.74 1,31,04,343.97 ---------

Gross Working Capital(1) 6,81,06,320 6,20,39,947

B) Current Liabilities
Sundry Creditors 3,54,94,571.72 1,58,05,553 1,96,89,018.72 ---------

Total Current Liabilities(2) 3,54,94,571.72 1,58,05,553

Working Capital(1-2) 3,26,11,748.28 4,62,34,394

Increase in Working Capital 1,36,22,645.72 --------- ------------- 1,36,22,645.72

Total 4,62,34,394 4,62,34,394 4,44,30,136.95 4,44,30,136.95

Analysis:
The above table shows that there is net increase in the working capital of
Rs.1,36,22,645.72 during the year 2014-15 with compared to the year 2015-16 This is
because of significant increase in sundry debtors, other current assets but there is a downfall
in the inventory, cash and bank balances. On the other hand current liabilities are decreased.
The net effect of the above changes has brought an increase in net working capital.

54
 Statement showing the changes in Working Capital for the year
2015-16 and 2016-17

Particulars 31/3/16 31/3/17 Increase Decrease

A) Current Assets
Inventory 92,48,773 2,23,06,584 1,30,57,811 ----------
Sundry Debtors 3,26,57,425.39 2,83,80,062.46 ---------- 42,77,362.93
Cash & Bank 4,12,017.87 4,89,987.94 77,970.07 -----------
Other Current Assets 1,97,21,730.74 85,29,097 ---------- 1,11,92,633.74

Gross Working Capital(1) 6,20,39,947 5,97,05,731.40

B) Current Liabilities
Sundry Creditors 1,58,05,553 88,76,129.86 69,29,423.14 -----------

Total Current Liabilities(2) 1,58,05,553 88,76,129.86

Working Capital(1-2) 4,62,34,394 5,08,29,601.53

Increase in Working Capital 45,95,207.53 ------------- ------------- 45,95,207.53

Total 5,08,29,601.53 5,08,29,601.53 2,00,65,204.21 2,00,65,204.21

Analysis:
The above table shows that there is net increase in the working capital of
Rs.45,95,207.53 during the year 2015-16 with compared to the year 2016-17 . This is
because of significant increase in inventory, cash and bank balances. But there is a downfall
in the sundry debtors and other current assets On the other hand current liabilities are
decreased. The net effect of the above changes has brought an increase in net working
capital.

55
 Statement showing the changes in Working Capital for the year
2016-17 and 2017-18

Particulars 31/3/1 31/3/18 Increase Decrease

A) Current Assets
Inventory 2,23,06,584 79,54,977 ----------- 1,43,51,607
Sundry Debtors 2,83,80,062.46 6,24,34,864.64 3,40,54,802.18 ----------
Cash & Bank 4,89,987.94 10,30,357.33 5,40,369.39 ----------
Other Current Assets 85,29,097 96,83,354 11,54,257 -----------

Gross Working Capital(1) 5,97,05,731.40 8,11,03,552.97

B) Current Liabilities
Sundry Creditors 88,76,129.86 1,01,04,429.37 --------- 12,28,299.51

Total Current Liabilities(2) 88,76,129.86 1,01,04,429.37

Working Capital(1-2) 5,08,29,601.53 7,09,99,123.60

Increase in Working Capital 2,01,69,522.07 ------------ ----------- 2,01,69,522.07

Total 7,09,99,123.60 7,09,99,123.60 3,57,49,428.57 3,57,49,428.57

Analysis:
The above table shows that there is net increase in the working capital of
Rs.2,01,69,522.07 during the year 2016-17 with compared to the year 2017-18 This is
because of significant increase in sundry debtors, other current assets, cash and bank
balances. But there is a downfall in the inventory. On the other hand current liabilities are
increased. The net effect of the above changes has brought an increase in net working
capital.

56
 Statement showing the changes in Working Capital for the year
2017-18 and 2018-19
Particulars 31/3/18 31/3/19 Increase Decrease
A) Current Assets
Inventory 79,54,977 1,78,23,396 98,68,419 ----------
Sundry Debtors 6,24,34,864.64 5,35,87,898.08 ----------- 88,46,966.56
Cash & Bank 10,30,357.33 12,75,758.21 2,45,400.88 ----------
Other Current Assets 96,83,354 1,20,68,081 23,84,727 ----------

Gross Working Capital(1) 8,11,03,552.97

B) Current Liabilities
Sundry Creditors 1,01,04,429.37 90,20,956.63 10,83,472.74 -----------

Total Current Liabilities(2) 1,01,04,429.37 90,20,956.63

Working Capital(1-2) 7,09,99,123.60 7,57,34,176.66

Increase in Working Capital 47,35,053.06 ----------- ------------- 47,35,053.06

Total 7,57,34,176.66 7,57,34,176.66 1,35,82,019.62 1,35,82,019.62

Analysis:
The above table shows that there is net increase in the working capital of
Rs.47,35,053.06 during the year 2017-18 with compared to the year 2018-19 This is
because of significant increase in inventory, other current assets, cash and bank balances.
But there is a downfall in the sundry debtors. On the other hand current liabilities are
decreased. The net effect of the above changes has brought an increase in net working
capital.

57
RATIO ANALYSIS:
1. Liquidity ratios:

These ratios measure the firm‟s ability to meet its current obligations as and when
they become due. Liquidity is a prerequisite for the survival of a firm. A firm should

ensure that it does not suffer from lack of liquidity. The failure of the company to use its
obligations put in a dangerous situation on the other named idle assets earns nothing.
Therefore a proper balance between the two contradictory requirements i.e., liquidity and
profitability is required for efficient financial management. The liquidity ratios measure
the ability of a firm to meet its short term obligations and reflect the short-term financial
strength/solvency of a firm.

The ratios, which indicate liquidity of a firm, are

a) Current ratio:

Current ratio is calculated by dividing total current assets to total liabilities. This
ratio is also known as “working capital ratio”.
Current assets
Current ratio =
Current Liabilities

Current assets include cash and those assets in marketable securities, debtors, stock,
prepaid expenses, which can be converted in to cash with in a year. Current liabilities
defined as liabilities, which are short term maturing obligation to be met, current
liabilities include creditors, Bills payable , Bank credit, and provision for taxation,
dividend payable, outstanding expenses.

A ratio greater than one means that the firm has more current claims against them.
Its conventional rule that a current ratio of 2 to 1 or more to be considered as
satisfactory. However current ratio is a crude and quick measure of firm‟s liquidity.

58
 Table showing current ratio
Years Current Assets Current Liabilities Current Ratio
31/3/1 6,81,06,320 3,54,94,571.72 1.92
31/3/16 6,20,39,947 1,58,05,553 3.93
31/3/17 5,97,05,731.39 88,76,129.86 6.73
31/3/18 8,11,03,552.97 1,01,04,429.37 8.03
31/3/19 8,47,55,133.29 90,20,956.63 9.40

Current ratio

10

current 6
ratio
4

0
2015 2016 2017 2018 2019
years

Analysis:

The Current ratio is an index of firm‟s financial ability. The ideal current ratio is
2:1. Higher the ratios better the coverage. From the above table it is clear that the current
ratio has been showing increasing trend during the above years of study period. Even
though in the year 2015-16 company‟s current ratio is less than the ideal ratio it has been
increased year by year. It is important to note that the poor current ratio is a danger signal
to the management and also higher current ratio would indicate lack of utilizing various
investment opportunities.

59
b) Quick Ratio:
Quick ratio or acid test ratio is more refined measure of firm‟s liquidity. This ratio
establishes a relationship between quick or liquid assets and current liabilities. Stock
and prepaid expenses are considered to be less liquid.

Current assets – Inventory

Quick Ratio =
Current Liabilities

Generally, a quick ratio of 1:1 is considered, representing a satisfactory current

financial condition. This ratio is of great important for banks and financial institutions.

Table showing Quick Ratio

Years Quick Assets Current Liabilities Quick Ratio

2015 4,03,18,200 3,54,94,571.72 1.14
2016 5,27,91,174 1,58,05,553 3.34
2017 3,73,99,147.40 88,76,129.86 4.21
2018 7,31,48,575.97 1,01,04,429.37 7.24
2019 6,68,92,817.29 90,20,956.63 7.42

Quick ratio

8
6
Quick
ratio 4
2
0
2014- 2015- 2016- 2017- 2018-
15 16 17 18 19
years

Analysis:
Generally Quick Ratio of 1:1 considered to be satisfactory. From the above table it
is observed that in 2015-16 the ratio is 1.14. It is continuously increasing and reached to
7.42 in 2018-19 . This indicates that the company is in favorable position. That is the firm
is liquid and it has the ability to pay its current obligations.

60
c) Cash Ratio:
It is the ratio of absolute liquid assets to quick liabilities. However for
calculation purposes it is taken as ratio of absolute liquid assets to current liabilities.
Absolute liquid assets include cash in hand and short term investments.

Cash in hand and bank

Cash Ratio =
Current Liabilities

Table showing Cash Ratio

Years Cash & Bank Current Liabilities Cash Ratio

2015 5,39,003.70 3,54,94,571.72 0.02
2016 4,12,017.87 1,58,05,553 0.03
2017 4,89,987.94 88,76,129.86 0.06
2018 10,30,357.33 1,01,04,429.37 0.10
2019 12,75,758.21 90,20,956.63 0.14

Cash ratio

0.15

0.1
Cash Ratio
0.05

0
2014- 2015- 2016- 2017- 2018-
15 16 17 18 19
Years

Analysis:
The above table shows that cash ratio is showing increasing trend. But it is not
reaching the standard ratio 0.51:1 so it might have faced the difficulty of short liquidity in
terms of cash. So it has to maintain its cash resources effectively in order to cover its current
liabilities.

61
d) Net working capital ratio:
Net working capital is sometimes used as a measure of firm‟s liquidity. It is
considered that between two firms the one having the larger net working capital has the
greater ability to meet current obligations. NWC however measures firm‟s potential of
funds. It can be related to net assets.

Net working
Net working capital ratio = capital Net Assets
Computation of Net Working Capital Ratio
Years Net working Net Assets NWC Ratio
Capital
2015 3,26,11,748.28 5,66,67,463.28 0.58
2016 4,62,34,394 7,92,61,853 0.58
2017 5,08,29,601.53 7,12,40,478.48 0.71
2018 7,09,99,123.60 8,89,77,044.55 0.80
2019 7,57,34,176.66 9,22,27,498.61 0.82

Net working capital ratio

1
0.8
0.6
NWC Ratio
0.4
0.2
0
2014- 2015- 2016- 2017- 2018-
15 16 17 18 19
Years

62
Analysis:
From the above table it is clear that the net working capital ratio has been showing
increasing trend during the above years of study period. In the year 2014-15 the ratio is
0.58 and it has increased to o.82 in the year 2018-19 The net working capital ratio is
satisfied.

2) Turnover Ratios:
Turnover ratios measure how efficiently the enterprise employs the resources or assets
at its command. They indicate the performance of the business. The performance of an
enterprise is judged with its sales (turnover). Turnover ratios are otherwise called as activity
ratios.

The ratios, which indicate efficiency of the firm, are

a) Debtors Turnover Ratio:

Debtors turnover ratio expresses the relationship between average debtors and
sales. It is calculated as follows:
Sales Average
Debtors Turnover Ratio =
Debtors

Average debtors are the simple average of debtors at the beginning and at the end of year.
The analysis of the debtors turnover ratio supplements the information regarding the
liquidity of one item of current assets of the firm. The ratio measures how rapidly
receivables are collected. A high ratio is indicative of shorter time-lag between credit sales
and cash collection. A low ratio shows that debts are not being collected rapidly.

Computation of Debtors Turnover Ratio

Years Sales Average Debtors Debtors Turnover Ratio
2015 38,10,13,523 3,26,43,229.68 11.67
2016 27,36,30,389 2,68,39,038.26 10.20
2017 35,65,74,550.48 3,05,18,743.92 11.68
2018 33,23,96,494.49 4,54,07,463.54 7.32
2019 35,92,77,141.83 5,80,11,381.36 6.19

63
 Debtors Turnover ratio

15

Debtors 10
turnover
ratio
5

0
2015 2016 2017 2018 2019
Years

Analysis:
Debtors turnover ratio has been showing the fluctuating trend. During the study
period, it is good sign that the company is following good collections and credit policies.

b) Inventory Turnover Ratio:

Inventory turnover ratio indicates the efficiency of the firm in producing and selling
its product. It is calculated by dividing the cost of goods sold by the average inventory.
The average inventory is the average of operating and closing balances of inventory. In
a manufacturing company inventory of finished goods is used to calculate inventory
turnover.

Sales
Inventory Turnover Ratio =
Average Inventory

Opening inventory + Closing inventory

Average Inventory =
2

64
 Computation of Inventory Turnover Ratio
Years Sales Average Inventory Ratio
2015 38,10,13,523 1,99,36,527 19.11
2016 27,36,30,389 1,85,18,446.50 14.78
2017 35,65,74,550.48 1,57,77,678.50 22.60
2018 33,23,96,494.49 1,51,30,780.50 21.97
2019 35,92,77,141.83 1,28,89,186.50 27.87

Inventory Turnover Ratio

30

Inventory 20
Turnover
Ratio
10

0
2014- 2015- 2016- 2017- 2018-
15 16 17 18 19
Years

Analysis:
From the above table it is observed that the inventory turnover ratio is showing
fluctuating trend. In the year 2015-16 the ratio is 19.11 that means the company is
converting its inventory into sales 19.11 times in a year and it has been increased to 27.87
in the year 2018-19 . This shows that company is making good use of its inventory.

c) Current Assets Turnover Ratio:

Current Assets turnover ratio expresses the relationship between net current assets and
sales. It is calculated as follows:

100

80

60 East
Wes
40
t
20
North
0
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr

65
 Sales

Current assets turnover ratio =

Net Current Assets

Computation of Current assets Turnover Ratio

Years Sales Net Current Assets Ratio
2015 38,10,13,523 3,26,11,748.28 11.68
2016 27,36,30,389 4,62,34,394 5.92
2017 35,65,74,550.48 5,08,29,601.53 7.02
2018 33,23,96,494.49 7,09,99,123.60 4.68
2019 35,92,77,141.83 7,57,34,176.66 4.74

Current Assets Turnover ratio

15

Current
Assets
10
turnover
Ratio
5

0
2015 2016 2017 2018 2019
Years

Analysis:

From the above table it is clear that use of current assets is fluctuating year by year.
In the year 2015-16 the ratio is 11.68 and it has decreased to 4.74 in the year 2018-19 .

66
 d) Working Capital Turnover Ratio:

This ratio measures the relationship between working capital and sales. The ratio
shows the number of times the working capital results. In sales working capital as usual is
the excess of current assets over the current liabilities.

Sales

Working Capital Turnover Ratio =

Working Capital

Comment:
Higher the ratio the greater are the profit, a low working capital over indicates that
working capital is not efficiently utilized.

Computation of Working Capital Turnover Ratio

Years Sales Working Capital Ratio
2015 38,10,13,523 3,26,11,748.28 11.68
2016 27,36,30,389 4,62,34,394 5.92
2017 35,65,74,550.48 5,08,29,601.53 7.02
2018 33,23,96,494.49 7,09,99,123.60 4.68
2019 35,92,77,141.83 7,57,34,176.66 4.74

Working Capital Turnover ratio

15
Working Capital 10
Turnover Ratio 5

0
2015 2016 2017 2018 2019
Years

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Analysis:
From the above table it shows that the higher working capital turnover ratio is 11.68
in the year 2015-16 it indicates that greater are the profits. A low working capital turnover
ratio is 4.74 in the year 2017-18 it indicates that working capital is not effectively utilized.

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 CHAPTER - 6
6.1FINDINGS:
1) Networking capital of Swaraj tractors is increasing year by year during the period
of study and which is good for the company.

2) The working capital is financed mostly by the long-term sources and marginally by
short-term sources. The company also used the retained earning to finance the
working capital needs. As per the annual reports, working capital demand loan is
secured by the hypothecation of raw materials, stores and spares, work in progress
finished goods and book debts both present and future.

3) Current ratio of the company for the years 2014-15 , 2015-16 , 2016-17 , 2017-18
and 2018-19 are 1.92,3.93,6.73,8.03,9.40 respectively. Higher the ratio better is
coverage. Standard ratio is 2:1, which shows that the company‟s current ratio is
more than the standard ratio.

4) Quick ratio during the study period has been increasing that is for the year 2014-15
is 1.14, 2015-16 is 3.34, 2016-17 is 4.21, 2017-18 is 7.24, 2018-19 is 7.42, which
shows these ratios are above the standard ratio of 1:1

5) Cash ratio which shows the short-term solvency of the firm in terms of cash during
the study period are 0.02, 0.03, 0.06, 0.10, 0.14 which is not up to the standard ratio
of 0.5:1.

6) The liquidity ratios indicate that Swaraj Tractors liquidity position is satisfactory.

7) Debtors turnover ratio has been showing the decreasing trend during the study
period except in the year 2018-19 which is not good for the company.

8) The components of working capital as well as sales are showing fluctuating trends.

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6.2 Suggestions:

1) The company depends more on bank borrowings and long term sources of funds for
working capital needs. The working capital required by the company is increasing
over years. The company should try to curtail the unnecessary expenditure in order
to reduce the cost of production and promote high return on sales.

2) As the company‟s current ratio is more than the standard ratio, it should decrease
the current assets which are in the form of sundry debtors, inventory etc.

3) The firm so maintaining the current assets satisfactory, but at the same time more
than 50% of current assets are blocked in the form of receivables. This is due to
giving credit sales to his customers and maximum portion of sales are in credit terms
only. If at all there is any possibility, the company should reduce the credit sales
and receivables holding period and to bridge the gap between the excess and
shortage of working capital.

4) The inventory position of the company is satisfactory. If the company will increase
its stock of inventory, then it will be more satisfactory in future.

5) The company needs to invest in marketable securities in order to increase its cash
ratio.

6) Debtors turnover ratio has been showing fluctuating trend. So it is suggested to the
company that it should have proper control on debtors turnover ratio.

7) As the company maintaining low cash resources it should try to maintain balance
between debtors and cash. That means it should reduce its debtors and increase cash
resources.

8) The sales of the company are showing fluctuating trends. So the company should
maintain proper control on sales.

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6.3 Conclusion:

Under the light of the inferences drawn from the analysis, it is no exaggeration to
conclude with information that the overall working capital management of Swaraj
Tractors is fair and reasonably good and thus promising future awaits the company.

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 CHAPTER 7
BIBLIOGRAPHY

Books referred:

1. I.M.Pandey Financial Management, 8th edition, Vikas publishing (pvt), New Delhi.
2. M.Y.Khan & P.K.Jain Financial management, 4th edition,TATA MC Grawhill
publishing co ltd, New Delhi.
3. Rajeswara Rao.K & Prasad.G Accounting & Finance, Jai Bharath Publishers.
4.S.P.JAIN, k.I. NARANG,ADVANCED ACCOUNTANCY,10TH EDITION
2003,KALYANI PUBLICATIONS,LYDIAN.
5.DAMODRAN ASWANTH “Corporate Finance”

Website references :
1.www.jains.com
2.www.workingcapitalmanagement.com
3.www.swarajtractors.com

Journals:
1.Finance India (Indian Institute of Finance)
2.The ICFFAI Journal of Applied Finance.

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