COMPANY OVERVIEW

Blue Star is India's largest central air-conditioning company with an

annual turnover of Rs 2270 crores, a network of 24 offices, 5 modern
manufacturing facilities, 650 dealers and around 2500 employees. Blue
Star has business alliances with world renowned technology leaders such
as Rheem Mfg Co, USA; Hitachi, Japan; Eaton - Williams, UK; Thales e-
Security Ltd., UK; Jeol, Japan; ISA, Italy and many others, to offer
superior products and solutions to customers. The Company has
manufacturing facilities at Thane, Dadra, Bharuch, Himachal and Wada
which use state-of-the-art manufacturing equipment to ensure that the
products have consistent quality and reliability. Blue Star fulfills the air-
conditioning needs of a large number of corporate and commercial
customers and has also established leadership in the field of commercial
refrigeration equipment ranging from water coolers to cold storages. Blue
Star's other businesses include marketing and maintenance of hi-tech
professional electronic and industrial products. Blue Star primarily
focuses on the corporate and commercial markets. These include
institutional, industrial and government organizations as well as
commercial establishments such as showrooms, restaurants, banks,
hospitals, theatres, shopping malls and boutiques.
VISION, MISSION, OBJECTIVES

 To deliver a world class customer experience.

 Focus on profitable company growth.

 Be a company that is a pleasure to do business with.

 Work in a boundary – less manner between divisions to provide

best solutions to customers.

 Win our people’s hearts and minds.

 Place the company’s interest above one’s own.

 Encourage innovation, creativity and experimentation in what we

do.

 Build an extended organisation of committed business partners.

 Be a good corporate citizen.

 Honour all personal and corporate commitments.

 Maintain personal integrity.

 Ensure high standards of corporate governance.

HISTORY AND GROWTH OF COMPANY

Blue Star was founded in 1943, by Mohan T Advani, an entrepreneur of

exemplary vision and drive. The Company began as a modest 3-member
team engaged in reconditioning of air conditioners and refrigerators. An
expanding Blue Star then ventured into the manufacture of ice candy
machines and bottle coolers and also began the design and execution of
central air-conditioning projects. Then came the manufacture of water
coolers. In 1949, the proprietorship company set its sights on bigger
expansion, took on shareholders and became Blue Star Engineering
Company Private Limited. Ever since, there has been a constant and
profitable growth. Blue Star diversified and took up agencies for Material
Testing Machines and Business Machines. The export arena beckoned
and the Company began exporting water coolers to Dubai, where in fact,
'Blue Star' soon became the generic name for water coolers. The sixties
and the early seventies witnessed Blue Star continuing to expand and
thrive. A team of dedicated professionals aided Mohan T Advani in ever
furthering his vision of a profitable company dedicated to its ideals of
professionalism and success. Employee strength crossed the 1000 mark
and the company went public in 1969 to become Blue Star Limited, as it
continues to be called today. Blue Star crossed the Rs. 500 crore
milestones in 2000 and the Rs. 600 crore milestones in 2002-03. With the
boom in construction activity and increased infrastructure investments,
the Company leveraged its leadership position to grow aggressively. In
the following three years, the Company nearly doubled its turnover,
clocking Rs 1178 crores in 2005-06. Even more than size, Blue Star
enjoys an enviable reputation as an ethical corporation, ever mindful of
its obligations towards customers, shareholders, dealers, business
partners, employees and the environment in which it operates.

MILESTONES

Year Event
1943 Mohan T Advani establishes Blue Star Engineering
Company as a proprietary firm
1946 Blue Star secures Melchior Armstrong Dessau agency
1947 Worthington selects Blue Star as Indian Partner.
Manufacturing of ice candy machines and bottle coolers
begins. Central air-conditioning system design and
execution begins
1948 Manufacture of water coolers commences
1949 Proprietorship converted to Private Limited Companies
1954 Blue Star selected as distributor for Honeywell
1955 GDR Testing machines distributorship begins
1957 Perkin-Elmer tie-up marks the start of the electronics
business. GDR business machines agency commences
1960 Total Income crosses the Rs 1 crore mark
1964 Total employment crosses 1,000
1965 Techniglas Pvt Ltd set up to manufacture insulation
material
1969 Factory moves from Colaba in Mumbai to Thane
1970 Hewlett- Packard distributorship commences
First skyscrapers of Mumbai – Air India Building, Express
1972 Towers and Oberoi Hotel set-up – all air-conditioned by
Blue Star
Total Income crosses Rs 10 crores. Employment crosses
1972
2,000
Water Cooler manufacturing license granted to Yusuf
1974
Alghanim, Kuwait
1977 Middle East thrust begins. Joint Venture (JV) with Al
 Shirawi in Dubai
1977 Hitachi Medical Equipment distributorship begins
1978 Industrial Division commences activity
1980 Bharuch Factory set up
1980-86 Major AC and R projects executed in the Middle East
1983 International Software Division inaugurated in Seepz
1984 York technology collaboration begins
Manufacture of centrifugal packaged chillers commences
1985
at Thane Plant
1986 Total Income crosses Rs 100 crores
1987 Yokogawa Blue Star JV formed
1987 Gandhinagar factory set up for EPABX systems
Blue Star becomes India’s largest central air-conditioning
1988
company
1988 Manufacturing collaboration with Mitsubishi
Assembly of personal computers under the brand name
1988
‘Quantum’ begins
1989 JV with Hewlett-Packard and Motorola
1990 Gandhinagar factory closes
1992 Total Income crosses Rs 200 crores
1992 Blue Star exits from Motorola JV
1993 Formation of Arab Malaysian Blue Star JV in Malaysia
1995 Blue Star exits from HP India JV
1997 Dadra Plant inaugurated
1998 Major thrust on dealerisation and brand building begins
1999 Blue Star exits from Industrial Projects business
International Software business spun off to form Blue Star
2000
InfoTech, listed on stock exchanges
Total Income crosses 500 crores. Export of air-
2001
conditioning products begins
2003 Blue Star exits Yokogawa JV
Blue Star sets up new factory at Kala Amb in Himachal
2005
Pradesh
2006 Total Income crosses the Rs 1000 crores mark
2006 Blue Star opts for a 5 for 1 stock split
 2007 Blue Star sets up its fifth factory at Wada, Thane District
Blue Star powers into Building Electrification. Acquires
2008
Naseer Electricals, a leading Electrical Contractor
2008 Total income crosses Rs. 2000 Crores.

MANUFACTURING PROCESS

Blue Star understands that skilled manpower and other staff members are
an indispensable part of the manufacturing set-up and the management
should work shoulder to shoulder with them. Management grade staff too
is put through training programs on various aspects of manufacturing and
business. Also, performance awards are announced every year. Apart
from enhancing the skills of the staff, such initiatives create a positive,
firm and lasting emotional bond between staff and company. This in turn
contributes to greater productivity.

MANUFACTURING SYSTEMS

The factories make extensive use of IT to enhance productivity and

product development capabilities. All our factories are ISO 9001: 2000
certified BAAN ERP implemented in 3 factories and Himachal under
implementation.

RAW MATERIAL AND MATERIAL MANAGEMENT

Sheet metal fabrication

A high degree of repetitive accuracy in sheet metal fabrication is

achieved by using specialized equipment, CNC metal forming machines.
The raw material used is prime quality, corrosion-resistant, galvanized
steel for enhanced life of the product. The equipment used for processing
the steel includes CNC machines such as an Amada turret punch press, a
LVD / Amada hydraulic press-break. All these allow for high quality
cabinet fabrication within tight tolerances

Power coating plant

The state-of-the-art powder coating plant covers a wide range of very

specialized process equipment, and is fully automated. A water-softening
unit treats the raw water before it is utilized in the automatic hot spray
pre-treatment system. It provides an even distribution of chemicals,
controlled by an auto dosing mechanism that maintains the chemical bath
composition with the help of electronic sensors. After a final mineral
water rinse, the components pass through a dry-off oven under dust-free
conditions to remove all traces of moisture. The components are then
transferred into the powder painting booth for coating, where
temperature, humidity and dust levels are controlled. The powder
painting equipment, supplied by Nordson, USA, is equipped with
automatic electromechanical oscillators, for even powder deposition.

Desiccant dry air-with a dew point of minus 40 0 C - helps avoid

any moisture contamination of the powder. A 'smart spray' mechanism
senses the conveyor movement and component geometry to adjust
powder flow. Polyester powder - ideally suited for out door applications
- provides the maximum protection against UV deterioration and
corrosion. The components finally pass through a temperature-regulated
curing oven to achieve desired gloss and surface hardness.

Heat exchangers
Experienced engineers create heat exchanger designs using high precision
design software, which are then validated in our test labs. Blue Star also
makes sure that the designs are energy efficient for optimum heat
transfer.

Fin and Tube: The sophisticated coil shops have some of the most
advanced machines from USA, Japan and Korea. The Burr Oak coil line
produces energy efficient DX heat exchangers. These have plain or
enhanced split fins with grooved copper tubes for maximum heat transfer
efficiency. Then the source plain and inner grooved copper tubes with
coated aluminum fin stock of international quality from leading
manufacturers to fit our specifications.

Shell and Tube: Blue Star has shell and tube exchangers using specially
enhanced surface copper tubes and shell design as per Blue Star or
TEMA standards. Blue Star uses Heat Transfer Research Inc. (HTRI
design software for these heat exchangers).

Plate Type: Blue Star products also incorporate stainless steel plate heat
exchangers for specialized process applications.

System tubing

3-axis CNC copper tube-bending machines from Japan fabricate wrinkle-

free system tubing to exact dimensions for a perfect stress-free fit. Special
purpose machines carry out operations like end closing, flaring and
forming for good joint formation. Prime quality copper tubes sourced
globally help in optimum product performance.

Brazing
The brazing process is carried out in an inert atmosphere to avoid
oxidation and the resultant impurities from contaminating the refrigerant
system. Specially selected brazing equipment and fixtures are used to
produce high quality brazing. The joints are pressure-tested to check weld
strength and leakage. The coils are then tested for fine leaks with ultra-
sensitive electronic leak detectors. An automated coil brazing line from
Korea ensures consistent quality brazing and leak proof joints.

PUF installation

Blue Star fabricates CFC-free PUF insulated panels by using the latest
equipment from Cannon. This enables to achieve a uniform and constant
density of insulation for air handling units, telecom shelters and cold
storage panels. Blue Star supply panels of up to 6 meters in length and 25
mm to 125 mm in PUF thickness. PUF insulation expertise finds use in a
wide range of applications such as Air Handling Units, water coolers,
deep freezers, reach-in coolers and mortuary chambers.

Assembly and testing

The final product is assembled sequentially on conveyors, with in-built

quality checks during assembly operations. Pneumatic tools permit
torque-controlled rigidity, and specially coated corrosion-resistant
hardware provides firm locking. Each machine is then electronically
tested for leaks and run-tested for performance and electrical safety
parameters before packaging.
PRODUCTS

CENTRAL AIRCONDITION

The building blocks of Blue Star’s solutions are its products. The most
comprehensive range of air-conditioning products in the country. A wide
range of models are available in each product category to ensure that the
air-conditioning system design is implemented without any compromise.
All products have been designed on the energy-efficiency platform, and
offer a host of advanced features.

Room air conditioners

By being an expert in the area of central air-conditioning, it also helps us

understand the cooling requirements of a diverse range of applications.
This expertise, knowledge and the skills have helped us to have some of
the most technologically advanced and energy efficient air-conditioning
solutions for small spaces.

Commercial Refrigeration

Having been the leaders in commercial refrigeration, we have a wide

range of products catering to various small and large scale industries
Cold storages

Blue Star’s Cold Storage Division offers us a wide range of cooling and
preservation solutions. Solutions tailored made to suit any industry that
requires storage of perishable produce over extended periods of time
without suffering any loss of quality – be it in look, feel, touch, taste or
chemical composition. Industries that find Blue Star’s cold storage
solutions enormously useful include the agriculture sector including
horticulture and floriculture units, manufacturers of fresh produce of any
kind, food processing units, pharmaceutical industries, seafood and other
similar industries, as well as the dairy and hospitality sectors, including
hotels, restaurants, and eateries.

Specialty Cooling Products

Blue Star has developed specialized products for process applications,

IT/ITES, telecom and the dairy industry. It has diverse experience and
have a deep understanding of the demands on air-conditioning and
refrigeration in each industry. This knowledge and domain expertise has
helped in designing and manufacturing a range of specialized products
which ensure that critical applications work seamlessly.

Research & Development

Blue Star offers complete engineered products and solutions with
differentiated features. With the extent of climatic conditions varying
across the nation, our products are designed to suit the specific local
conditions. Considering the shortfall of Electricity supply, all the
products are designed for energy efficiency. Blue Star products are most
preferred in the domestic market because of energy efficiency features. In
the offer, they are widest range of products for varying applications. This
is possible due to extensive research and development that goes behind
the products.

All our factories are equipped with robust R&D facilities and a lot of
importance is given towards continuous up gradation. Currently R&D
team constitutes nearly 20% of the manufacturing division work force.
This is a testimony to the significance that R&D has in the product
development process at Blue Star. R&D team is encouraged to update
with the latest techniques and processes in the field and thus are sent to
various exhibitions / site visits across the globe. Consultants from various
industries are also hired for specific industrial design projects.

Blue Star also believes in associating itself with leading global

organizations that have done path breaking work in the field of
innovations. The company also has tie-ups with reputed companies for
knowledge sharing and technical institutions like IIT, Mumbai, where
individual projects are executed. R&D at Blue Star also handles customer
specific requirements, which require tremendous amount of expertise in
that particular domain. Software that R&D team has deployed and which
is used on a regular basis - Pro-Engineer, Solid Edge, AutoCAD, Pro
Mechanics, R&R, HTRI, Mechanical Desktop, Rhino, Alias, CATIA,
IDEAS, Solid Works, Patran, Hypermesh, Femap, Ansys, Nastran,
Fluent, Flow Mechanica and Moldflow. Software packages including
those for system design, air handling unit selection and heat exchanger
optimization.

TECHNOLOGY ASSOCIATES

Blue Star has associated itself with global knowledge partners who have
been leaders in specific product manufacturing. Through this partnership,
Blue Star has been able to command a leadership position in the domestic
market. Blue Star initially tied-up with York in the mid 1980s. It has been
able to leverage this expertise and learning to manufacture its own
Chillers. We now manufacture our own range of Screw, Scroll and
Process Chillers. For Cold Rooms, Blue Star had tied-up with Kolpak,
USA and Heat Craft for Freezing Units. Rheem, USA not only provided
technical support for building the world class Dadra manufacturing unit,
but also shared technical expertise. The foray in precision equipment
business was achieved with support from Eaton Williams. Blue Star now
manufactures Precision Control Packaged Units for domestic and global
markets.
BUSINESS ASSOCIATES

In keeping with its win-win approach, Blue Star treats its vendors as not
just suppliers, but as business partners and tries to build long term
associations that are profitable both to the suppliers and to Blue Star. In
line with this thought, Blue Star has entered into long term arrangements
with its key suppliers, many of whom are world leaders. For instance,
Blue Star sources its Switchgears from Siemens, Compressors from
Danfoss of Netherlands and Refrigerant from DuPont. General Electric
Corp of USA provides Motors, while Hanbell of Taiwan supplies Screw
Compressors. Copeland of USA assists in System Design.

Over the years, Blue Star has built a strong network of suppliers around
it. Not only that, the company also helps in the development of its smaller
suppliers by providing various business related and technical inputs to
them. For instance, since the vendors are also manufacturers, they will
benefit from some of the good manufacturing practices that Blue Star
adopts. Blue Star has educated a number of small vendors on the
importance of ISO certification and encouraged them to get certified
within a certain time period. This approach has greatly boosted the
morale of vendors and firmly bonded them with Blue Star. Also, it
ensures that the suppliers walk side-by-side with Blue Star on the path to
growth.

MARKETING ACTIVITIES AND MANAGEMENT IN BLUE STAR

MARKETING ACTIVITIES AND MANAGEMENT IN BLUE
STAR

EXPORTS

Blue Star has been exporting its products to the Middle East for over two
decades. Blue Star products have stood the test of time in some of the
most difficult climatic conditions in the world such as UAE, Qatar,
Bahrain, Oman and Kuwait. On offer it has a comprehensive range of
products such as chillers with screw and hermetic scroll compressors, a
wide range of air handling and fan coil units, duct able packaged and duct
able split air conditioners including the heat pump versions. Blue Star
also offers unitary products such as window and split air conditioners,
deep freezers, cold rooms, water coolers and specialized air conditioners
for precision control applications, Variable Refrigerant Flow (VRF)
Systems with digital scroll technology and process chillers with
frequency modulation. These world-class products are manufactured at
our state-of-the-art manufacturing facilities in India. All the
manufacturing facilities are ISO 9001: 2000 certified, and are powered
through integrated Enterprise Resource Planning (ERP) software.
Moreover, most of the products go through stringent tests on reliability
and performance in our test labs.

SUPPLY CHAIN MANAGEMENT

Rapid growth coupled with volatility of input costs necessitated an agile

and adaptable supply chain. The Blue Star focused on both the efficiency
and responsiveness of all aspects of the supply chain by improving all
round execution capability. A combination of short term and long term
view along with the support of business associates helped the

Company tide over the uncertainty and turbulence of increasing input

costs. The supply chain adequately met the increased demands of the
market place supporting greater channel and project business success.

CHANNEL DEVELOPMENT

Blue Star has around 180 systems dealers who exclusively deal in the
Company's systems businesses consisting of packaged air conditioning
and cold rooms. These dealers are provided technical expertise,
installation and service competence of a high order. On the other hand,
room air conditioners and refrigeration products, which are simple to
install, are sold through a larger network of approximately 600 dealers.
Most of them deal exclusively with Blue Star products in the HVAC
domain. A few are multi-brand, multi-product dealers. The Company has
established a Channel Management Centre to oversee the policy
framework, certification and development of dealers and also put in place
a Training Department for training channel partners. During the year, the
Company implemented a number of initiatives in order to strengthen the
competence of the dealer channels and make them more robust. A
Management Development Program (MDP) for systems dealers was held
to impart the essentials of managing a business professionally. Systems
dealers were also put through a Sales Management training programme in
order to enhance their sales competence.

HUMAN RESOURCE MANAGEMENT IN BLUE STAR

HUMAN RESOURCE MANAGEMENT

Blue Star takes pride in the fact that the invaluable technical and business
knowledge it has acquired in 65 years as an organization in the field of air
conditioning and refrigeration is perhaps the richest in the country.
During the review period, with the substantial increase in business
volume, the Company increased its total head count to 2565 (including
the absorbing of 124 employees from Nasser Electricals) as on March 31,
2008, an increase of 18% over the previous year, while Net Sales grew by
39%. Organizational productivity continued to grow in terms of sales per
person and value added per person. The focus on people development
continued at the same pace with special attention to developing the
technical skills of dealers and business associates. Training in soft skills
for Blue Star employees was enhanced with the introduction of some new
training programmes. In order to sustain the positive culture of the
Company, a new corporate programme was introduced called 'The Blue
Star Way'. This programme is intended to create an awareness of, and
strengthen the Blue Star Way of working.

A 360-degree feedback system continued to be used to

measure behavior of Senior Managers pertaining to the Corporate Values
and Beliefs. Environment, Health & Safety (EHS) has gained relevance
as a new management discipline in recent times. In order to improve its
performance in the EHS domain, the Company decided to provide a
corporate focus by creating a new department called 'Environment,
Health & Safety'. The EHS Department will be responsible for creating
standards and conducting workshops to sensitize all employees and
business partners on the EHS norms to be followed in the course of
business. The Welfare initiatives include providing life insurance cover to
all employees through HDFC Standard Life Insurance, annual medical
check-ups for employees above the age of 40 years, and the Company
subsidizing the medical insurance premium for dependent parents. The
Mohan T Advani Education Trust disbursed scholarships to employees'
children pursuing higher professional education while Blue Star Sahayata
Foundation extended financial assistance to a number of deserving cases
for mitigating emergency medical expenses. Harmonious and
constructive relations between the Management and workmen helped to
maintain a cordial work atmosphere and achieve business growth.

CORPORATE SOCIAL RESPONSIBILITY

Eco friendly initiative

Blue Star has made significant progress towards minimizing and even
eliminating the environmental hazards resulting from CFCs in certain
refrigerants used for cooling. As a matter of fact, Blue Star is one of the
few companies selected in India for funding by "The Multilateral Fund
for the implementation of the MONTREAL PROTOCOL". Blue Star has
already introduced 'ozone friendly' centrifugal chillers using HCFC-123,
the safe refrigerant replacing CFC-11. Blue Star also markets absorption
chillers which use water as refrigerant. All Blue Star reciprocating
chillers already use HCFC-22 refrigerant which is friendlier to the
environment than the older R-12. The Company actively promotes wider
use of large refrigeration systems using ammonia as the refrigerant. In
fact, Blue Star is a member of the International Institute of Ammonia
Refrigeration, USA.

Social initiative

Blue Star firmly believes that organizations must look beyond making
profits and should contribute to the development and welfare of the
society. This attitude is most evident in the outreach initiatives organized
by Blue Star's factories. Blue Star factories take active participation in
providing temporary shelters and essentials for the victims of an
earthquake, sponsoring health check-ups and health education programs
in local schools. The families of operators are an integral part of social
development. Blue Star gives them appropriate advice on personal
matters, financial and investment matters. The family members are also
imparted training on diverse subjects. They are taught English as well.

Environmental initiative

Blue Star's factories have been exquisitely landscaped with lawns and
flowering plants dotting the campus. Trees have also been planted on a
proactive basis even outside the Blue Star factories. As a responsible
organization, special ETP plants are installed to dispose off the wastes
generated. Additionally, all our factories are designed for rain water
harvesting.

RISKS AND CONCERNS

RISKS

The Company has in place an effective Risk Management framework

under which all internal and external risks across the various businesses
and functions are periodically identified, assessed and acted upon by the
risk owners to minimize and mitigate their impact. These processes are
also periodically reviewed to ensure their effectiveness.

The Company continues to satisfactorily address the various financial

risks relating to interest rates, exchange rates and credit risks as well as
operating risks arising out of high input costs, changes in technology,
customer preferences, increasing size and complexity of contracts and
competitive pressures.

CONCERNS

While the strong fundamentals of the Company and it's sound financial
base have placed it in a strong position to face the vagaries of the market,
the overall uncertain economic scenario coupled with local and global
inflation and the high price of oil are causes for concern and consequently
a slow down in the economy could impact the growth of the Company to
some extent in the coming year. The Company will continue to remain
vigilant and will proactively take steps to mitigate the adverse impact, if
any, arising out of these concerns.

Employee development

The benefit of a mature business organization with 65 years of

operational excellence is that there are several good systems in place.
From a prospective employee point of view, Blue Star offers the
following advantages:

 There are well designed induction and technical orientation

programmes. There is a Corporate Technical Training Organization
which delivers a variety of technical training programmes for the
AC&R business. Engineers who join the Electronics Division get a
chance to go abroad for training with the Principals. The Corporate
HR runs a menu of non-technical soft skills training programmes
such as Business Communication Skills and Business Etiquette.

 The Blue Star Company has many well designed, time tested HR
practices such as setting the performance objectives at the
beginning of the year, reviewing employee performance every year
through an annual appraisal system and an annual compensation
review based on market surveys. In addition to a market aligned
salary structure, Blue Star also has a fairly attractive incentive
scheme wherein, the employee gets an incentive based on his
 department’s performance coupled with his own performance
rating.

 Typically, graduate engineers can look forward to entering real

managerial grades within 4 to 5 years. Once an employee enters the
managerial grade, he is exposed to a variety of management
education programmes including some programmes at IIM.
Ahmedabad.

 Last, but not the least, Blue Star rightly boasts of the Blue Star
Way, which is founded on a set of values and beliefs which have
evolved over time. These beliefs have made Blue Star a highly
respected, secular organization. The Company has an excellent
track record of employees working for many decades with the
Company. In today’s high attrition market, the Company continues
to enjoy the privilege of retaining many of its employees for many
decades, thanks to its positive work culture.
 The company lays stress on continuously upgrading the skills of
operators, so that they keep increasing their productivity in the face
of changing manufacturing practices. Operators are put through
training programs, on passing which they are given certificates. In
the long term, these certificates also become a yardstick for
measuring employee performance. Learning through cross
functional activities is encouraged. In addition to that, staff
members and operators are encouraged to exercise yoga, play
sports and participate in community development initiatives. This
helps in the overall development of the individual and improves
performance. Kaizen and 5S are an integral part of all factory
operations.
Career at BLUE STAR

Since engineering and technical expertise are at the heart of the Blue Star
value proposition, engineers constitute the bulk of Blue Star’s
recruitment. Consequently, engineers (graduate as well as diploma) can
find technically satisfying and well paying jobs in the following areas of
Blue Star

Air conditioning Projects Division:

Mechanical engineers are deployed in 3 different disciplines i.e. Sales,

Design & Engineering and Construction. Blue Star also entered the
commercial building electrical business since 2008. Consequently,
electrical engineers (graduate and diploma) can also find careers in the
Electrical Projects

Manufacturing:

Blue Star manufactures a wide range of air conditioning and refrigeration

equipment at its five factories. Here, careers can be made in R & D,
Production, Production Planning, Manufacturing Engineering, Quality
and Reliability and Procurement. Graduates as well as post graduates in
mechanical, electrical and electronics engineering can find rewarding
careers in Blue Star’s manufacturing group.

Air-conditioning & Refrigeration Service Division:

Here again, engineers constitute the bulk of recruitment. Careers can be

made broadly in 3 disciplines viz. Service Marketing, Service Delivery
and Service Specialists’ Group.

Channel Businesses:
Packaged air conditioners, room air conditioners, refrigeration products
and cold storages are mostly executed through licensed channel partners.
Consequently, engineers as well as MBAs with an aptitude for marketing
can develop satisfying careers in any of the channel businesses.

Management Services:

Like in all large corporate, the Company has well structured management
service departments such as Procurement & Logistics, Finance and
Accounts and Human Resources. Blue Star looks for talented
professionals with appropriate qualifications for these departments.

Work with BLUE STAR

An industry that’s over Rs. 12,000 crores can be the opportunity to meet
your ambitious career goals. The cooling industry is thriving in a rapidly
developing industrial landscape wherein almost every major corporate
and commercial segment needs to cool down with efficient cooling
systems. No wonder the company is slated to grow at a rate of more than
30% in the next few years. And this is the point where the cooling
company really becomes hot.

To propel career in this arena, one definitely need an organization that

has what it takes to command a leadership position in the industry. Blue
Star is the India’s largest central air-conditioning and commercial
refrigeration company with over six decades of experience in providing
expert cooling solutions. It has been associated with the most prestigious
installations and projects in the country and enjoys a preferred partner
status in most of the high growth segments. The Company has tripled its
turnover over the last three years and continues to be on a strong growth
trajectory.
 WORKING CAPITAL

The term working capital refers to the capital required for day to
day operations of a business enterprise. It is represented by excess of
current assets, over Current liabilities. It is necessary for any organization
to run successfully its affairs, to provide for adequate working capital.

ADVANTAGES OF ADEQUATE WORKING CAPITAL

Working capital is the lifeblood and nerve center of business.

Just as circulation of blood is essential in the human body for
maintaining life, working capital is very essential to maintain the
smooth running of a business. No business can run successfully
without an adequate amount of working capital. The main
advantages of maintaining adequate amount of working capital are
as follows:

1. Solvency of the business: Adequate working capital helps in

maintaining solvency of the business by providing uninterrupted
flow of production.

2. Goodwill: sufficient working capital enables a business

concern to make prompt payments and hence helps in creating
and maintaining goodwill.

3. Easy loans: a concern hacking adequate working capital, high

solvency and good credit standing can arrange loans from banks
and others on easy and favorable terms.

4. Cash Discounts: Adequate working capital also enables a concern

to avail cash discounts on the purchases and hence it reduces costs.

5. Regular payments: Regular payments of salaries, wages and other

day-to-day commitments company which has sample working capital
can make regular payment of salaries. Wages and other day-to-day
commitments which raises the morale of its employees, increase their
efficiency reduces wastage’s and costs and enhances production and
profits.
6. Regular supply of raw materials: Sufficient working capital
ensures regular supply of raw materials and continues production.

7. Ability to face Crisis: Adequate working capital enables a concern

to face business crisis in emergencies such as depression because
during such periods. Generally, there is much pressure on working
capital.

8. Quick and Regular return on Investments: Every investor wants

a quick and regular return on investments. Sufficient of working
capital enables a concern to pay quick and regular dividends to its
investors, as their may not be much pressure to plough back profits.
This gains the confidence of its investors and creates a favorable
market to raise additional funds in the future.

9. High morale: Adequacy of working capital creates an

environment of security, confidence and high morale creates over all
efficiency in a business.

DISADVANTAGES OF EXCESSIVE WORKING CAPITAL

 Every business concern should have adequate working capital to
run its business operations. It should have neither redundant or excessive
working capital nor inadequate nor shortage of working capital. Both
excessive as well as short working capital positions are bad for any
business.

1. Excessive working capital means idle funds which earn no profits for
the

Business and hence the business cannot earn a proper rate of return on
its Investments.

2. When there is redundant working capital, it may lead to unnecessary

Purchasing and accumulation of inventories causing more chances of

Theft, waste and losses.

3. Excessive working capital implies excessive debtors and defective

credit Policy, which may cause higher incidence of bad debts.

 It may result into overall inefficiency in the organization.

 When there is an excessive working capital relation with the banks
and other financial institutions may not be maintained.
 Due to low rate of return on investments the value of shares may
also fall.
DISADVANTAGES OF INADEQUATE WORKING CAPITAL

1. A concern, which has inadequate working capital, cannot pay its

short-term liabilities in time. Thus it will loose its reputation and
shall not be able to get good credit facilities.
2. It cannot buy its requirements in bulk can cannot avail of discounts
etc.
3. It becomes difficult for the firm to exploit favorable market
conditions and undertaken profitable due to lack of working
capital.
4. The firm cannot pay day-to-day expenses of its operations and it
creates inefficiencies, increase costs and reduces the profits of the
business.
5. It becomes impossible to utilize efficiently the fixed assets due to
non- availability of liquids funds.
6. The rate of return on investments also falls with the shortage of
working capital.

DETERMINANTS OF WORKING CAPITAL

In determining the working capital requirements of a concern, the

following are to be considered.

1. Nature and size of Business

2. Manufacturing cycle
3. Sales Growth
4. Production Policy
5. Price Level Changes
6. Firms Credit Policy
7. Availability of Credit

1. Formative phase:
 The Start up of a new project years from the most crucial phase
planning and provisioning of working capital funds. By neglecting
this, many ventures run into financial difficulties in their early
operating years, the rather casual approach to assessment of working
capital needs during the periods when industry and business
functioned in a sellers market could be understand as at the banker
was willing to absorb all shock of fluctuations in project operations by
providing ready funds to meet emergency needs. The position has
undergone radical change. The banker can no longer be taken for
granted and in the absence oil proper estimation of working capital
needs, the project may have to face serious financial problems.

2. Position of Business Cycle:

Movements of the business cycle bring about shifts in working

capital position. The upward swing is associated with spurt in sales
and increase in levels of inventories and book debts. There could be a
cash shortage and borrowing may become necessary. On the other
hand, when there is a downswing, the level of inventories and book
debts may fall, but revenues also fall, while certain categories of costs
remain fixed and cash shortage right still be felt.

3. Nature of Business:

The nature of business has an important bearing on its working

capital needs, some ventures like retail stores, construction companies
etc. require an abundance of working capital. In other cases such as
power generations and supply, the current assets playa minor and
secondary role.
1. The manufacturing CycleS

A longer manufacturing cycle between the raw material purchase

and the completion of the manufacturing process will obviously mean
larger tie up of funds to meet increased working capital needs. In such
cases management should try to increase the rate of production and
reduce the cycle time and thus cut down working capital requirement.
This can be achieved through process changes or through effective
organization and coordination at all levels of enterprise activity.
Frequent changes in setups, waiting for materials, tools or instructions
and accumulations of working progress result inn extending the time
cycle and blocking more funds. Organised negotiations with suppliers
for attractive credit terms and retention of their continued confidence
by the settlement of bills on agreed dated can also help reduce
working capital requirements.

1. Credit Terms to Customers:

The credit terms to customers influence the working capital level

by determining the level of investment in book debts. Management
has to decide on suitable credit policy relevant to each customer based
on the merits of his case.

Unduly liable credit policies and permissive attitude in the matter

of collections of outstanding can lock up funds that would be other
wise be available for operating needs.
2. Vagaries in supply of Raw Materials

The sources of certain raw materials are few and irregular and pore
problems in the matter of procurement and holding, using up more
funds. Materials that are available only in certain seasons have to be
obtained and stored in advance. The working capital requirements in
such instances will show seasonal fluctuations.

3. Shifts in Demand for Products:

Some manufactured products are subject to seasonal fluctuations in

sales. In order to utilize the capacity to the maximum possible extent,
steady production may have to be maintained, through the demand for
finished products may very from time to time. Finished goods
inventories will therefore accumulate during off season, requiring
increased amounts of working capital to support higher levels of
inventory. Financial planning will have to provide for these funds,
requirements associated with steady, production and seasonal sales.

4. Production Polices:

To tackle the problem of having to find funds to support the

increasing finished goods inventory levels until they are sold during
the peak seasons, some companies diversify and produce other
products that are in demand, enabling manufacture of the main
product to follow the seasonal pattern of its demand.
5. Competitive Conditions:

In a competitive market, winnings and maintaining customers

goodwill will involve additional costs and present a variety of working
capital problems. To offer the customer the benefit of choice, a variety
of products will have to be manufactured and stocked. This would
mean higher levels of inventories in all stages and, therefore,
additional working capital funds. More generous credit terms may
have to be extended and the investments in accounts receivables may
have to be higher, requiring additional funds. The degree of
completion is thus an important factor influencing working capital
requirements.

6. Growth and Expansion Programs:

As business grows, additional working capital has to be found. In

fact, the need for increased working capital does not follow the
growth in business activity, but preceded it. Advance planning of
working capital is thus a continuing necessity for example Owing
concern. Or else, the company may have substantial earnings but little
cash. With fast growth, they may be under constant pressure for
raising external funds in addition to the internal generation. Forward
planning and continuous review, therefore, are very essential for such
companies.
7. Profit Levels:

By the very nature of things, some enterprises generate high

margins compared to others. The product category and the firm’s
position in the market may have given this advantages. Others have to
struggle in a highly competitive environment. But, profits cannot be
considered as available cash at the end of the period. Even as the
companies operations are in progress, cash is used up for augmenting
stocks, book debts and fixed assets. Elaborate planning and
projections of expected activities and cash flows, at short intervals,
assume importance. To meet anticipated deficits, sources of funds
will have to be identified and where surpluses are expected, suitable
applications will have to be planned.

8. Taxation:

Tax liability is an inescapable element in working capital planning.

It is a short term liability payable in cash. Advance taxes may have to
be remitted in installment’s, on the basis of estimated profits. Periods
of high taxation impose additional strain on working capital. To able
to get the best out of the available tax incentives, the finance manager
has to draw up the operating plans of the company in advance and
utilize the resources for research and development, exports or other
purposes which promise tax benefits and promote the companies
earnings.

9. Dividend Policy:

Management has to preserve cash resources but at the same time,

it can not fail to satisfy investor expectations. Market prestige for the
shares of the company has also lobe nurtured and maintained in its
long run interests. During periods of low profits, maintenances of
steady dividends will involve draining of resources but may be
needed to preserve the companies image.

10.Reserves Policy:

One of the cherished goal of enterprise management is to build

up adequate reserves out of profits the urge to retain profits may act
as a major constraint on the dividend policy. The funds position being
given higher priority over dividend policy.

11.Depreciation Policy:

Depreciation policy determines the amount to be provided as,

depreciation on the various categories of Fixed Assets. The
depreciation charges do not in any cash outflow. Enhanced rated of
depreciation have the effect of reducing profits correspondingly,
which in turn can help in holding back of dividends. This process
conserves cash depreciation policies.

12. Price level changes:

Rapidly raising prices creates the need for more funds for
maintaining the present volume of activity for same levels of
inventories, higher cash outlays are needed. In an inflationary set up,
even operating expenses will grow for given levels of activity. Some
companies may be able to compensate part of these cost increases
through increases in prices for their products. The implications of
changing price levels on working capital position will vary from
company to company depending on the nature of the company.
13. Operating Efficiency:

This is a close relationship between the operating efficiency of a

company and its working capital position. Waste elimination,
improved coordination 19 cut delays higher efficiency in operations
and full utilization of resources are among the initiatives taken to
prevent erosion of profits. They also have the effect of getting more
out of given volume of working capital or obtaining the current levels
of out puts with a reduced volume of working capital. Efficiency of
operation accelerates the place of the cash cycle, and improves the
working capital turnover.
 WORKING CAPITAL MANAGEMENT

Working capital management involves the relationship between a

firms short term assets and its short term liabilities. The goal of working
capital management is to ensure that a firm is able to continue its
operations and that it has sufficient ability to satisfy both maturing short-
term debt and upcoming operational expenses. The management of
working capital involves managing inventories, accounts receivable and
payable and cash.

Why firms hold cash:

The finance profession recognizes the three primary reasons

offered by economist JOHN Maynard Keynes to explain why firms hold
cash. The three reasons are for the purpose of speculation, for the purpose
of precaution, and for making transactions. All three of these reasons
from the need for companies to process liquidity.

CONCEPTS OF WORKING CAPITAL

 There are two concepts of working capital:

(i) Gross Working Capital

(ii) Net Working Capital

In the broad sense, the term working capital refers to the gross
working capital and represents the amount of funds invested in current
assets. Current assets are those assets, which in the ordinary course of
business can be converted into cash within a short period of normally one
accounting year.

In a narrow sense, the term working capital refers to the net

working capital. Net working capital is the excess of current assets over
current liabilities.

Working Capital = Current Assets – Current Liabilities

Net working capital may be positive or negative. When the current

assets exceed the current liabilities, the working capital is positive and the
negative working capital results when the current liabilities are more than
the current assets.
 The Gross working capital concept in financial or going concern
concept whereas net working capital is an accounting concept of working
capital. These two concepts of working capital are not exclusive; rather
both have their own merits.

Gross concept is very suitable to the company form of organization

where there is divorce between ownership, management and control. The
net concept of working capital may be suitable only for proprietary form
of organizations such as sole-trader or partnership firms. However, it may
be made clear that as per the general practice net working capital is
referred to simply as working capital.

TYPES OF WORKING CAPITAL

There are varying concepts or perceptions of working capital,

which have relevance to specific situations.

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1. GROSS WORKING CAPITAL:

Gross working capital represents by the sum total of all current

assets of the enterprise. Enough funds will have to be provided to sustain
the movement of raw materials through the work.

But short term financing is more risky than long term financing. In
process to the finished goods stage and then to accounts receivables and
up to the realization of cash. In other words, the funds needed would total
up to the constituent components, namely stock of raw materials and
minimal cash and bank balances, constituting working capital. In
managing gross working capital, the shifts in investment in current assets
are under constant review, close attention and prompt correction.
Excessive investment in current assets is to be carefully avoided, as
otherwise profits would be adversely affected.
2. NET WORKING CAPITAL:

Net working capital is the difference between the current assets and
current liabilities. While current assets are short term assets that are
expected to get converted into cash with in one year, current liabilities are
short-term liabilities that are expect to fall due or mature for payment in a
short period, generally within a year, and represent short term sources of
funds. The concept of net working capital, as the excess of current assets
over current liabilities, highlights the character of he Sources from which
the funds have been obtained to support that portion of current assets in
excess of current liabilities. This part of working capital may be provided
by way of share capital, from internal sources such as reserves or plough
back of profits or from external sources in the form of long term
borrowings. There are two implications. The management has to examine
what proportion of the current assets has to be financed by permanent
capital and long term borrowings. Then there is the eagerness of short
– term creditors to verify whether the total current assets,

representing ultimate source of funds for the recovery of their dues,

maintains a convincing level above the total current liabilities or
obligations. A judicious

policy of mixing long term and permanent as distinct from short

term sources should be formulate to finance investment in current assets.

3. PERMANENT WORKING CAPITAL:

Permanent or fixed working capital is the minimum amount, which

is required to ensure effective utilization of fixed facilities and for
maintaining the circulation of current assets. There is always a minimum.

Level of current assets, which are continuously required by the

enterprise to carry out its normal business operations. For example. Every
firm has to maintain a minimum level of raw materials, work-in-progress,
finished goods and cash balance. This minimum level of current assets is
called fixed working capital.

TEMPORARY WORKING CAPITAL:

 Any amount over and above the permanent level of working capital
is temporary, fluctuating or variable working capital. This portion of the
required working capital is needed to meet fluctuations in demo
consequent upon changes in production and sales because of seasonal
changes.

WORKING CAPITAL CYCLE

Cash flows in a cycle into, around and out of a business. It is the

business’s lifeblood and every manager’s primary task is to help keep it
flowing and to use the cash flow to generate profits. If a business is
operating profitably, then it should , in theory, generate cash surpluses. If
it doesn’t generate surpluses, the business will eventually run out or cash
and expire.

The faster a business expands the more cash it will need for
working capital and investment. The cheapest and best sources of cash
exist as working capital right within business. Good management of
working capital will generate cash will help improve profits and reduce
risks. Bear in mind that the cost of providing credit to customers and
holding stocks can represent a substantial proportion of a firm’s total
profits.

There are two elements in the business cycle that absorb cash –
Inventory (stocks and work-in-progress) and Receivables (debtors
owing you money). The main sources of cash are payables (your
creditors) and Equity and Loans.

Each component of working capital (namely inventory, receivables

and payables) has two dimensions … TIME ……. And MONEY. When
it comes to managing working capital – TIME IS MONEY. If you can
get money to move faster around the cycle (e.g. collect monics due from
debtors more quickly) or reduce the amount of money tied up (e.g. reduce
inventory levels relative to sales). The business will generate more cash
or it will need to borrow less money to find working capital.

Consequently, you could reduce the cost of bank interest or you

will have additional free money available to support additional sales
growth or investment. Similarly, if you can negotiate, improved terms
with suppliers e.g. get longer credit or an increased credit limit; you
effectively create free finance to help fund future sales.
 If you… Then…..

 Collect receivables  You release cash from

(debtors) faster the cycle
 Collect receivables
(debtors) shower
 Your receivables soak up
 Get better credit (in terms
cash
of duration or amount)
from suppliers
 Shift inventory (stocks)  You increase your cash

faster resources

 Move inventory (stocks)

slower  You free up cash
 You consume more cash

It can be tempting to pay cash, if available, for fixed assets e.g.

computers, Plant, vehicles etc. if you do pay cash, remember that this is
now longer available for working capital. Therefore, if cash is tight,
consider other ways of financing capital investment – loans, equity,
leasing etc. Similarly, if you pay dividends or increase drawings, these
are cash outflows and, like water flowing down a plughole, they remove
liquidity from the business.

More business fail for lack of cash than for want of profit.

The third area in the account receivable management is collection

policies. These policies cover two aspects.

 Degree of effect to collect overdue

 Type of collection effects.
 The collection policy should aim at accelerating collections from slow
payees and reducing bad debt.
 CHAPTER IV
DATA ANALYSIS AND INTREPRETATION

STATEMENT SHOWING THE CHANGES IN WORKING

CAPITAL

(In Rupees 000)

PARTICULAR 2005 2006 INCREAS DECREAS CHANG

S E E E IN %

Rs Rs.
Current Assets
Advance 1,25,75 1,34,97 9,224 73.3
3 7
Stock 35,90 54,27 18,374 51.17
2 6
Receivables 18,83 28,73 9,900 52.57
0 0
Cash 41 56 149 35.99
4 3
Debtors 1,28,46 1,10,60 17861 13.90
4 3
Bank 2,73 5,34 2614 95.68
2 6
Total(a) 3,12,09 3,34,49
5 5
Current
Liabilities
Borrowing 20,00 37,46 17464 87.32
0 4
Payables 12,38 12,54 157 1.26
8 5
Surplus 10,15 9,81 342 3.36
5 3
Dividends 2,54 2,73 187 7.35
4 1
Total(b) 45,08 62,55
7 3
Networking 2,67,08 2,71,94
capital 8 2
Increase in 4,93
4
working
 capital
Total: 2,71,94 2,71,94 40,603 40,603
2 2

INTERPRETATIONS:-

1. By observing the above table we can notice that the Gross

Working capital has increased during the year 2005-2006.

2. From the above table there has been increase in Current

Assets from Rs. 3,12,095 in the year 2005 to Rs. 3,34,495 in
year 2006 showing an overall increase. And Current
Liabilities increased from 45,087 in year 2005 to Rs. 62,553
in year 2006 showing an overall increase. Understudy of
above table working capital overall increase 4,934 in 2005-
2006.

3. There it is to be noticed that greater the net Working Capital

higher liquidity, there is found 1year of Blue star
STATEMENT SHOWING THE CHANGES IN WORKING
CAPITAL

(In Rupees
000)

INCREAS DECREAS
PARTICULAR CHANG
2006 2007 E E
S E IN %
Rs Rs.
Current Assets
Advance 1,34,97 1,46,04
11,070 8.20
7 7
Stock 54,276 57,676 3,400 6,026
Receivables 28,730 52,759 24,029 83.63
Cash 563 1,382 819 145.47
Debtors 1,10,60 1,30,62
20,019 21.71
3 2
Bank 5,346 5,961 615 11.50
Total(a) 3,34,49 3,94,44
5 7
Current
Liabilities

Borrowing 37,464 53,858 16,394 43.75

Payables 12,545 12,658 513 1.36
Surplus 9,813 10,555 742 7.56
Dividends 2,731 2,924 193 7.03
Total(b) 62,553 79,995
Networking 2,71,94 3,14,45
capital 2 2

Increase
inworking 42,110 42,110
capital
Total: 3,14,45 3,14,45
59,952 59,952
2 2
INTERPRETATIONS:-

1. By observing the above table we can notice that the Gross Working
capital has increased during the year 2006-2007

2. From the above table there has been increase in Current Assets
from Rs. 3,34,495 in the year 2006 to Rs. 3,94,447 in year 2007
showing an overall increase. And Current Liabilities increased
from 45,087 in year 2006 to Rs. 62,553 in year 2007 to Rs. 79,995
in the year 2007 showing an overall increase. Understudy of above
table working capital overall increase 42,111 in 2008-2007.

3. There it is to be noticed that greater the net Working Capital higher

liquidity, there is found 1year of Blue star

STATEMENT SHOWING THE CHANGES IN WORKING

CAPITAL

(In Rupees
000)

INCREAS DECREAS
PARTICULAR CHANG
2007 2008 E E
S E IN %
Rs Rs.
Current Assets
Advance 1,46,04 1,68,13 22,088 15.12
7 5
Stock 57,67 81,34 23,665 41.03
6 1
Receivables 52,75 77,17 24,412 46.27
9 1
Cash 1,38 44 934 67.58
2 8
Debtors 1,30,62 2,09,64 79,027 60.50
2 9
Bank 5,96 4,63 1,331 22.33
1 0
Total(a) 3,94,44 5,41,37
7 4
Current
Liabilities

Borrowing 53,85 1,60,69 1,06,83 198.36

8 4 6
Payables 12,65 21,54 8,88 70.20
8 4 6
Surplus 10,55 10,97 418 3.96
5 3
Dividends 2,92 3,32 405 13.89
4 9
Total(b) 79,99 1,96,5
5 40
Networking 3,14,45 3,44,83
capital 2 4

Increase in 30,38 30,382

working capital 2

Total: 3,44,83 3,44,83 1,49,192 1,49,192

4 4

INTERPRETATIONS:

1. By observing the above table we can notice that the Gross

Working capital has increased during the year 2007-2008.
2. From the above table there has been increase in Current
Assets from Rs. 3,94,447 in the year 2007 to Rs. 5,41,374 in
year 2008 showing an overall increase. And Current
Liabilities increased from 79,995 in year 2007 to Rs.
1,96,540 in year 2008 showing an overall increase.
Understudy of above table working capital overall increase
30,381 in 2007-2008.
3. There it is to be noticed that greater the net Working Capital
higher liquidity, there is found 1year of Blue star

STATEMENT SHOWING THE CHANGES IN WORKING

CAPITAL

(In Rupees
000)

PARTICULAR INCREAS DECREAS CHANG

2008 2009
S E E E IN %
 Rs Rs.
Current Assets
Advance 1,68,13 2,09,20 41,065 15.12
5 0
Stock 81,34 1,36,9 55,594 41.03
1 35
Receivables 77,17 54,21 22,952 46.27
1 9
Cash 44 1,2 762 67.58
8 10
Debtors 2,09,64 3,20,34 1,10,695 60.50
9 4
Bank 4630 11,9 7288 157.41
19
Total(a) 5,41,37 7,33,82
4 6
Current
Liabilities

Borrowing 1,60,69 2,08,81 48,124 198.36

4 8
Payables 21,54 21,05 491 70.20
4 3
Surplus 10,97 10,43 542 3.96
3 1
Dividends 3,32 3,57 242 7.27
9 1
Total(b) 1,96,54 2,43,87
0 3
Networking 3,44,83 4,89,95
capital 4 3

Increase in 1,45,11 1,45,119

working capital 9

Total: 4,89,95 4,89,95 2,16,43 2,16,437

3 3 7

INTERPRETATIONS:

1. By observing the above table we can notice that the Gross

Working capital has increased during the year 2008-2009.

2. From the above table there has been increase in Current

Assets from Rs. 5,41,374 in the year 2008 to Rs. 7,33,826 in
year 2009 showing an overall increase. And Current
Liabilities increased from 1,96,540 in year 2008 to Rs.
2,43,873 in year 2009 showing an overall increase.
Understudy of above table working capital overall increase
1,45,119 in 2008-2009.
3. There it is to be noticed that greater the net Working Capital
higher liquidity, there is found 1year of Blue star
STATEMENT SHOWING THE CHANGES IN WORKING
CAPITAL

(In Rupees
000)

PARTICULAR 2009 2010 INCREAS DECREAS CHANG

S E E
 Rs Rs. E IN %
Current Assets
Advance 2,09,200 2,38,43 29,235 13.97
5
Stock 1,36,935 69,1 67,831 49.54
2 04
Receivables 54,219 41,0 13,203 24.35
16
Cash 121 1,5 347 28.68
0 57
Debtors 3,20,344 3,06,16 14,177 4.43
7
Bank 11,91 33,5 21,64 81.63
8 65 7
Total(a) 7,33,826 6,89,84
4
Current
Liabilities
Borrowing 2,08,81 1,98,9 9,850 4.72
8 68
Payables 21,053 24,05 3004 14.27
7
Surplus 10,431 12,1 1,682 16.12
13
Dividends 3,571 4,20 629 17.61
0
Total(b) 2,43,87 2,39,3
3 38
Networking 4,89,953 4,50,50
capital 6
Increase in 39,447 39,447
working
capital
Total: 4,89,953 4,89,95 1,00,526 1,00,526
3

INTERPRETATIONS:

1. By observing the above table we can notice that the Gross Working
capital has increased during the year 2009-2010

2. From the above table there has been decrease in Current Assets
from
Rs 7,33,826 in the year 2009 to Rs. 6,89,844 in year 2010 showing
an overall decrease. And Current Liabilities decreased from
Rs.2,43,873 in year 2009 to Rs. 2,39,338 in year 2010.Showing an
overall decrease. Understudy of above table working capital overall
increase 4,535 in 2009-2010.

3. There it is to be noticed that greater the net Working Capital higher

liquidity, there is found 1year of Blue star.

RATIOS OF WORKING CAPITAL IN Bluestar Air Condtioners

MEASUREMENT OF CURRENT RATIO Bluestar air condtioners

MEASUREMENT OF CURRENT RATIO’S

a) CURRENT RATIO:

Current ratio is the relationship between current assts and current

liabilities. This ratio’s is a measure of general liquidity and is must
widely used to make the analysis or a short-term financial position or
liquidity of a company is calculated by dividing the total current assets by
total current liabilities.

CURRENT RATIO = CURRENT ASSETS /CURRENT LIABILITIES

The Ideal ratio of current ratio is= 2:1

(a) CURRENT RATIO

(b) QUICK RATIO

 A) CURRENT RATIO ANALYSIS

YEAR/PARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-10

(Rs) (Rs) (Rs) (Rs) (Rs)

CURRENT ASSETS 334495 394447 541374 733826 689271

CURRENT 62553 79995 196540 243873 237560

LIABILITIES
RATIO 5.35 4.93 2.75 3.01 2.90

Relatively high current ration is on indication of the companies liquidity

position and has the ability to pay its obligation in time as and when they
become due on the other hand a relating low current ratio represent that the
liquidity position of the company is not good and the company shall not be able
to pay its current liabilities in time without facing difficulties. An increase in
current ratio’s represents the improvement in the liquidity position of a
company while a decrease in current ratio indicated that there has been a
deterioration in the liquidity position of company as a convention. The current
ratio of 2:1 is considered to be satisfactory. But in case of firms in India this is
about 1.3:1 is rather than 2:1 during to strict monetary policy of Reserve Bank
of India.
 6

0
2005-06 2006-07 2007-08 2008-09 2009-10

It can be observe from the above graph that the current ratio of the bank
moves 5.36to 2.90 during the study perform from 2005-06 to 2007-08.Generally
consider satisfactory ratio 2:1 the ratio of bank less than the consider satisfactory
ratio, this ratio indicate that the cushion over able to short-term creditors are
relatively lower. An average its standards at 2:1 which is less than the consider
satisfactory ratio of 2:1 that is every one rupee of current liabilities minimum 2
Rupees are available as margin of set.
B) QUICK RATIO:

Quick Ratio also known as Acid Test or Liquid ratio is a more vigorous
quick assets and current Liabilities. Quick ratio can be calculated by dividing the
total quick assets by total current liabilities.

QUICK RATIO = QUICK ASSETS / CURRENT LIABILITIES

Usually a high quick ratio is an indication that the company is liquid and has the
ability to meet its current or liquidity liabilities in time and on the other hand a low
quick ratio represents that the company liquidity position is not good. An increase
in the quick ratio reveals the liquidity position of the company improved. As a
general rule a quick ratio of 1:1 is considered to be satisfactory. But the acceptable
ratio for Indian firms may 0.80:1 instead of 1:1.
QUICK ASSETS = CURRENT ASSETS – (STOCK+PREPAID EXPENSES)

II.QUICK RATIO:-

YEAR/PARTICULAR 2005- 2006- 2007- 2008- 2009-

S 06 07 08 09 10

(RS) (Rs) (Rs) (Rs) (Rs)

QUICK ASSETS 20219 336771 460033 596891 620167

CURRENT 62553 79995 196540 243873 237560

LIABILITIES

RATIO 4.48 4.21 2.34 2.45 2.61

 6

0
2005-06 2006-07 2007-08 2008-09 2009-10

Interpretation:

By the above table we can observe the quick ratio of the bank at 2006-07 is 2.45
but idle quick ratio is 1:1.

These ratios are used to know the liquidity positions of organizations. The
ideal ratio for Quick ratio is 1:1.The above graph shows the changes in quick
ratio from the year 2006-07 to 2007-08.In the year 2005-06 the quick ratio is
4.48,it is decreased to 4.21 in 2006.

In the year 2006-07 it is decreased to 2.34, in the year 2006-07 if we

compare with to 05-06 it is increased to 2.45, in the year 2007-08 it is increased
to 2.61.
C) DEBT EQUITY RATIO = LONG TERM DEBTS / SHARE HOLDERS
FUNDS

YEAR/PARTICULARS 2005-06 2006-07 2007-08 2008-09 2009-10

(Rs) (Rs) (Rs) (Rs) (Rs)

LONG TERM DEBTS 2951 3233 1870 2529 12796
SHRE HOLDERS 160602 183979 211604 239850 302103
FUNDS

RATIO 0.02 0.017 0.008 0.011 0.04

SHARE HOLDERS FUND = SHARE CAPITAL + PREFERENCE SHARES

+GENERAL RESERVES
 0.04

0.04

0.03

0.03

0.02

0.02

0.01

0.01

0
2005-06 2006-07 2007-08 2008-09 2009-10

Interpretation:

From the above graph it can be observe that in the year 2007-08 the debt
equityratio is 0.02, which is decreased to 0.017 in the year 2007-08. in the year 07-
08 it is decreased to 0.008, in 2007-08 it is 0.011, in the year 2007-08 it is
increased to 0.08.
D) Absolute Cash Ratio=Absolute assets / Current Liabilities

YEAR/PARTICULARS 2005- 2006- 2007-08 2008-09 2009-10

06 07
Absolute assets 58895 64094 99753 121380 163814

Current Liabilities 62553 79995 196540 243873 237560

Ratio 0.941 0.801 0.507 0.497 0.589

Absolute Assets= C.H + C.B + Short Term Investment+ Market securities

 1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2005-06 2006-07 2007-08 2008-09 2009-10

Interpretation:

From the above graph we can observe that the absolute cash ratio is
decreased compared to 2006-07 to 2005-06 is 0.941 to 0.801, in the year 2006-07
is 0.507 which is decreased to 0.497 in 2007-08.

In the year 2007-08 ratio is increased compared to 2007-08 is 0.689

CHAPTER V

CONCLUSIONS

AND

SUGGESTIONS

CONCLUSIONS & SUGGESTIONS:

 In the 5 years of this project work of working capital from 2005-
2006 to 2006-2007. there is a highly increase in working capital in
2008-2009 to 2009-2010. It is a highlights of two years. But in
2007-2008 year there is a decrease in working capital.

 Items, which our co-operative sells, our families must buy only
from the co-operative if we need to buy after co-operative shop is
close for the day, then we must learn to do with it till tomorrow.
On account may be buying from other shops. If co-operative sells
the same item.
 It is better to see at reasonable rates and later to return to surplus to
members or add the services being provided to them.
 Continuous internal audit by members / staff, appointed by
managing committee is must for every co-operative because it
exposes flaws early enough for rectifications.
 Individual who have not bother to approach to the co-operative for
using its services it part has no business demanding membership at
the time of election.

FINDINGS:
In this chapter attempt is made to performs suitable suggestion to improve the
financial performance of “Blue star”

They are as follows

 The society should take some remedial measures to control its productive
cost to increase its profits.
 The society should decrease its unrecovered percentage of loans and
advances. It should study the credit worthiness for the members and based
on this should advanced loan.
 If the society starts recording its non performing assets (BS A/C). It could
understand the current financial positions of its at the end of the year and it
could take necessary to control NPA’S as this are productive

 The society should decrease its long term borrowing (deposits) to decrease
the interest payment as it pays more EPS.

 The ROI of society was recorded poor when compare to other financial
institutions.

 it is due to rendering services to its members, even than it has to increase

the interest percentage slightly to survive and grow and serve its members .
BIBILOGRAPHY

BIBLIOGRAPHY
NAME OF THE BOOKS, PUBLISHERS AND AUDITORS

 MANAGEMENT ACCOUNTING

 KALYANI PUBLISHERS, 8th  R.K. SHARMA &

EDITION  SHASHI K. GUPTA

 COST ACCOUNTING

 KALYANI PUBLISHERS, 8th

 S.P. JAIN & K.L. NARANG
EDITION

 FINANCIAL MANAGEMENT PRINCIPLES AND PRACTICE

 S.M. MAHESWARI

 FINANCE MANAGEMENT

 GALGOTIA
 R.P. RUSTAGI
PUBLICATIONS