A

Project
On
WORKING CAPITAL MANAGEMENT
Of
BAJAJ AUTO Ltd

Submitted in the partial fulfilment

For the award of degree in

MASTER OF BUSINESS ADMINISTRATION

To
Jaypee Business School, Noida

A constituent of JIIT Noida

On

March 5th, 2019

Under The Guidance Of: Submitted By:

Dr. Sujata Kapoor, Prakriti Bari (18609011)

1st Year, Batch 2018-2020
Department of Business Administration,
Jaypee Business School
Biocon Ltd
Biocon Limited: is an Indian biopharmaceutical company based in Bangalore, India. The
Company manufactures generic active pharmaceutical ingredients (APIs) that are sold in over
120 countries across the globe, including the developed markets of the United States and
Europe It also manufactures novel biologics, as well as, bio similar insulin and antibodies,
which are sold in India as branded formulations. Biocon's bio similar products are also sold in
both bulk and formulation forms in several emerging markets. In research services, Syngene
International Limited (Syngene), a publicly listed subsidiary of Biocon, is engaged in the
business of integrated end-to-end drug discovery and development services.
Biocon's formulations for the Indian market straddles Metabolic, Oncology, Immunotherapy,
Nephrology and Specialty. Some of Biocon's key brands in India include INSUGEN (rh-
insulin), BASALOG (Glargine), BIOMAb EGFR (Nimotuzumab), BLISTO (Glimepiride +
Metformin), CANMAb (Trastuzumab), Evertor (Everolimus), TACROGRAF (Tacrolimus),
ALZUMAb (Itolizumab) and KRABEVA (Bevacizumab), which are claimed to be
considerably less expensive than other leading brands. Two of its novel programs on the
verge of proof-of-concept stage are IN-105, which is the only oral insulin in the world to be
in long duration clinical trials, and T1h, a novel humanised monoclonal antibody (MAb), the
only first-in-class novel MAb being tested in India for rheumatoid arthritis and psoriasis.
Biocon and Syngene together employ about 9200 personnel including biologists, chemists,
medical practitioners, pharmacologists, engineers, finance/legal/marketing analysts, HR
generalists and general administrators.

MEANING AND NATURE OF WORKING CAPITAL MANAGEMENT

The management of working capital is concerned with two problems that arise in attempting
to manage the current assets, current liabilities and the inter relationship that asserts between
them. The basic goal is working capital management is to manage current assets and current
liabilities of a firm in such a way that a satisfactory of optimum level of working capital is
maintained i.e. it is neither inadequate nor excessive. This is so because both inadequate as
well as excessive working capital position is bad for business.

Operating cycle Analysis

Operating cycle refers to the time period which starts from the raw material purchases and
ends with realization of receivable. So it is total time gap between raw material purchases to
total debtors collection. This is also known as working capital cycle. Operating cycle is
therefore expressed in terms of months or weeks or days the higher the operating cycle
period, higher the working capital requirement. It comprises of raw material conversion
period, WIPconversion period, FG conversion period and debtors conversion period and
creditors period.The basic reason for calculating operating cycle is to find out the means for
reducing the duration of operating cycle because if duration of operating cycle will be less
than working capital requirement will be less.
Operating cycle (2018)

1- RMCP=Average raw material inventory/Raw material consumed *360

Average raw material inventory=opening RM inventory + closing RM
inventory/2
Avg RMI=106.75

RMCP=106.75/1051.20 *360

RMCP=36.55 Days

2- Work in progress conversion period=Avg WIP/Avg cost of production or

manufacturing cost *360
WIPCP=245.85/759.1 *360

WIPCP=116.59 Days

3- Finished goods conversion period=Avg finished goods inventory/Avg

COGS *360
FGCP= 131.5/2211.1 *360
FGCP=214.1 Days

4- Receivable conversion period=Avg debtors/Credit sales *360

RCP=769.05/2211.1 *360
RCP=125.21 Days

5- Creditors conversion period=Avg creditors/credit sales *360

CCP=515.1/2211.1 *360
CCP=83.86 Days

Operating cycle (2017)

1- RMCP=Average raw material inventory/Raw material consumed *360

Average raw material inventory=opening RM inventory + closing RM
inventory/2
Avg RMI=107.7

RMCP=107.7/1081.7 *360

RMCP=35.84 Days
 2- Work in progress conversion period=Avg WIP/Avg cost of production or
manufacturing cost *360
WIPCP=203.15/739.7 *360

WIPCP=98.87 Days

3- Finished goods conversion period=Avg finished goods inventory/Avg

COGS *360
FGCP=151.55/2375.7 *360
FGCP=22.96 Days

4- Receivable conversion period=Avg debtors/Credit sales *360

RCP=651/2375.7 *360
RCP=98.65 Days

5- Creditors conversion period=Avg creditors/credit sales *360

CCP=422.45/2375.7 *360
CCP=64.01 Days
Interpretation

As per the calculation, GOC in 2018 is increasing if compared with the year 2017, it means
company is taking more time to convert the raw materials into finished goods.

And, if we talk about NOC, it is increasing in the year 2018 when compared with 2017, which
indicates that time takes for conversion is also more.

Net working capital

Every organisation needs two forms of financial resources – long-term resources for investing
and purchase of fixed assets and sustainability and short-term resources is to run the day-to-
day operations like purchase of raw material, payments, etc. The capital which is required to
operate routine business activities is termed as working capital. It deals with the short-term
resources i.e. current assets and current liabilities. The main reason behind people looking at
balance sheet more keenly is to find out a company’s working capital (or liquidity) position.
It reveals more about the financial performance of a company in comparison to any other
calculations. It discloses the financial position of a company, when it raises short-term loans
to pay off its current obligations/liabilities.
 Net working capital
(Indian Rupee .in 2018 2017
Crores)
Current assets
1603.9 1853.8
Current liabilities
831.6 705.2

Working capital CA-CL 772.3 1148.6

2017
1- Raw material Inventory Turnover Ratio=Raw material consumption/Average Raw
material Inventory
RMI turnover ratio=1081.7/107.7

RM inventory turnover ratio =10.04 Times

2- Raw material Holding period= Average Raw material Inventory/Raw material

Consumption*360
Raw material holding period=107.7/1081.7 *360

RMHP=35.84 Days

3- Work in Progress Turnover Ratio= Cost of Production/Average WIP Inventory

Work in Progress Turnover Ratio= 739.7/203.15

WIP Turnover Ratio=3.64 Times

4- WIP Inventory Holding period= Average WIP inventory/Cost of production*360

WIPHP=203.15/739.7 *360

WIHP=98.87 Days

5- Finished Goods Turnover Ratio= Cost of sales/Average FG inventory

FG turnover ratio=2375.7/151.55

FG turnover ratio=15.67 Times

6- Finished Goods Holding Period= Average FG inventory/Cost of sales*360

FG Holding period=151.55/2375.7 *360

FGHP=22.96 Days
2018
1- Raw material Inventory Turnover Ratio=Raw material consumption/Average Raw
material Inventory
RMI turnover ratio=1051.2/106.75

RM inventory turnover ratio =9.85 Times

2- Raw material Holding period= Average Raw material Inventory/Raw material

Consumption*360

Raw material holding period=106.75/1051.2 *360

RMHP=36.55 Days

3- Work in Progress Turnover Ratio= Cost of Production/Average WIP Inventory

Work in Progress Turnover Ratio= 759.1/245.85

WIP Turnover Ratio=3.08 Times

4- WIP Inventory Holding period= Average WIP inventory/Cost of production*360

WIPHP=245.85/759.1 *360

WIPHP=116.59 Days

5- Finished Goods Turnover Ratio= Cost of sales/Average FG inventory

FG turnover ratio=2211.1/131.5

FG turnover Ratio=16.81 Times

6- Finished Goods Holding Period= Average FG inventory/Cost of sales*360

FG Holding period= 131.5/2211.1 *360

FGHP=21.41 Days

Gross operating cycle (2018)

GOC=ICP+RCP

Inventory conversion period=RMCP+WICP+FGCP

Receivable conversion period=RCP

GOC=367.24+125.21

GOC=492.45 Days
Net operating cycle (2018)

NOC=GOC-CCP

Gross operating cycle=GOC

Creditors Conversion period=CCP

NOC=492.45-83.86

NOC=345.59 Days

Gross operating cycle (2017)

GOC=ICP+RCP

Inventory conversion period=RMCP+WICP+FGCP

Receivable conversion period=RCP

GOC=157.67+98.65

GOC=256.32 Days

Net operating cycle (2017)

NOC=GOC-CCP

Gross operating cycle=GOC

Creditors Conversion period=CCP

NOC=256.32-64.01

NOC=192.31 Days