“Working Capital Management” – A study at

GODREJ CONSUMER PRODUCT LIMITED MALANPUR

A Study Project
Submitted to University Of Gwalior in Partial fulfillment of the requirements for the
Award of under Graduate degree in management.

2016-2018

Submitted to: Submitted By:

Mr. Keshav kansana Jatin Behrani
Head of the department Roll No. BCMH1CF16011
(School of Business) B.com Honours

ITM UNIVERSITY
AH-43 Bypass, Jhansi Road, Gwalior
 DECLARATION
I, JATIN BEHRANI hereby declare that project entitled “WORKING CAPITAL
MANAGEMENT- A STUDY AT GODREJ CONSUMER PRODUCT LIMITED” with
reference to ‘GODREJ GROUP’ submitted to partial fulfillment of the degree for
Master of Business Administration.
ITM UNIVERSITY (Gwalior) is of my accurate
work.
I further declare that all facts and figures presented in this report are purely
based on my experience. All the information gathered by me during the course of
the project at GODREJ CONSUMER PRODUCT LIMITED will be kept strictly
confidential and will not be disclosed without the prior written consent of GODREJ
COMPANY, MALANPUR.

JATIN BEHRANI
 ACKNOWLEDGEMENT
It is my present duty to acknowledge me deep sense of gratitude to all those who
have been kind of enough to help me directly & indirectly in completion of my
summer training project.
I express my sincere thanks to Mr. Keshav kansana (Head of department of ITM
UNIVERITY) for permitting me to undergo summer training.
I am obliged to Mr. Nitin Chaturvedi (Faculty of SOB), who’s co-operation,
including enthusiasm, informal behavior and friendly guidance has helped me at
every instance.
I like to express my gratitude to all those who gave me the possibility to complete
this project. I want to thank to department of finance of Godrej Consumer Product
Limited for giving me permission to commence this project in the first instance to
do the necessary research work and to use departmental data.
I am highly indebted to Mr. Mukul Sharma (Finance Executive), and Mr. Avinash
Mishra (GM & P&A) for extending his regular support and guidance. I am also
thankful to Mr. Hamid Ali (exec. – P&A) whose help stimulating suggestions and
encouragement helped me in whole duration of the training.
Especially, I would like to my special thanks the authorities of “Godrej Consumer
Product Limited” Malanpur for their humble attitude, co-operation provided by
them.
 With Sincere thanks
JATIN BEHRANI

PROJECT PROPOSAL SHEET

Project Title:-
“Working Capital Management –
A Study at GCPL”

Name of the Group:-

GODREJ GROUP

Name of the Company:-

GODREJ CONSUMER PRODUCT LTD.

Project Head & Supervisor:-

Mr. Mukul Sharma

Project Duration:-
(25-05-2018 to 10-07-2018)
 CONTENTS OF TABLE

1 INTRODUCTION OF GROUP
2 GODREJ GROUP
3 MANAGEMENT PROFILE
4 COMPANY PROFILE
5 VISION, MISSION & OBJECTIVES
6 OBJECTIVES OF THE STUDY
7 RESEARCH METHODOLOGY
8 INTRODUCTION OF THE TOPIC
9 DATA INTERPRETATION & ANALYSIS
10 FINDINGS
11 CONCLUSION
12 RECOMMEDATIONS
13 BIBLOGRAPHY
INTRODUCTION
OF THE
GROUP

GROUP PROFILE
GODREJ GROUP
The consumer products business is over 85 years old erstwhile. Godrej
soaps limited (GSL) was transferred to the newly inspected Godrej
consumer products in April 2001, pursuant to a scheme of demerger, the
name of Godrej soap ltd. (GSL) was changed to Godrej industries ltd
(GIL). GIL retained the business comprising industrial chemicals, medicals
diagnostics and estate operations.
Godrej consumer’s product limited is a manufacturing company,
established in 1919, it is engaged in the production / marketing of
various soaps, toiletries, fatty acid, glycerin, and various other
intermediate products.
The company has its manufacturing units at Ambernath,
Valia, Wadal, Malanpur and Dombivl.
Godrej Consumer Product Ltd
(GCPL) is a leader among India’s Fast Moving Consumer Goods
companies, with Personal and Home Care products. Its brands, which
include Cinthol, godrej No.1, Expert and Ezee, among others, are
household names across the country.
Branch Offices in Mumbai, Delhi,
Kolkata and Chennai ensure pan-India coverage, while factories located
at Malanpur (MP), Thana (HP), Katha (HP), Guwahti (Assam) and Sikkim
cater to the diverse requirements of our product portfolio.
With the
acquisition of Keyline Brands in the United Kingdom, Rapidol and Kinky
Group, South Africa and Godrej Global Mideast FZE a 100% subsidiary of
Godrej International, GCPL now owns international brands and
trademarks in Europe, Australia, Canada, Africa and the Middle East.
At GCPL, we are driven by our mission to continuously enhance the
quality of life of consumers in high-growth markets with superior quality
and affordable personal care and hygiene products.
 GODREJ GROUP COMPANIES – At a Glance in India

 Godrej Consumer Products – Soaps, Toiletries, Detergents.

 Godrej Industries Ltd. – Active agent olio chemical.
 Godrej pecific technology Ltd. – Office automation.
 Godrej telecom ltd. – steel furniture and equipment’s.
 Godrej international ltd. – international trading.
 Godrej properties and investment ltd. – real estate
development.
 Godrej agrovent ltd. - Animal feeds and agro products.
 Godrej H.J. care ltd. – Agro products and household
insecticides.
 Godrej foods ltd. – Food processing and edible oil.
 Godrej and kis ltd. – Photography equipment.
Company profile
 INTRODUCTION OF GPCL
Godrej Consumer Products Limited (GCPL)
Godrej Consumer Products Limited, an associate of your Company, has continued
to grow ahead of the overall FMCG sector, as well as the home and personal care
categories that it participates in, despite a challenging macro environment.
On a consolidated basis, GCPL reported a Total Income of ` 9,684 crore during the
FY2016-17 compared to ` 8837 crore for FY2015-16. The net profit grew by 58% at `
1304 crore as compared to ` 828 crore during the FY2015-16.
GCPL is a leading emerging markets company. As part of the 120-year young Godrej
Group, GCPL is fortunate to have a proud legacy built on the strong values of trust,
integrity and respect for others. At the same time, it is growing fast and has
exciting, ambitious aspirations.
Today, the Godrej Group enjoys the patronage of 1.1 billion consumers globally,
across different businesses. In line with its 3 by 3 approach to international
expansion, GCPL is building a presence in 3 emerging markets (Asia, Africa, Latin
America) across 3 categories (home care, personal wash, hair care). It ranks among
the largest household insecticide and hair care players in emerging
GODREJ NATURE’S BASKET
In household insecticides, it is the leader in India, the second largest player in
Indonesia and expanding its footprint in Africa. It is the leader in serving the hair
care needs of women of African descent, the number one player in hair colour in
India and Sub-Saharan Africa, and among the leading players in Latin America. It
also ranks number two in soaps in India, and is the number one player in air
fresheners and wet tissues in Indonesia.
However, it is very important that besides its strong financial performance and
innovative, much- loved products, GCPL remains a good company. About 23% of
the holding company of the Godrej Group is held in a trust that invests in the
environment, health and education. We are also bringing together our passion and
purpose to make a difference through our 'Good & Green' approach to create a
more inclusive and greener India.
At the heart of all of this, is a talented team. GCPL takes much pride in fostering an
inspiring workplace, with an agile and high performance culture. It is also deeply
committed to recognising and valuing diversity across our teams.
It was ranked the number 1 FMCG Company to work for in the ‘Great Place to Work
– Best Workplaces in India 2016’ list; its thirteenth consecutive year on the list. It
was also ranked number 12 on the ‘Great Place to Work – Best Workplaces in Asia
2017’ list and ranked among the top 19 ‘Aon Hewitt Best Employers in India - 2017’
survey.
VISION AND MISSION
As part of this vision, our Group-level goals till the year 2020 are:
• Train 1 million rural and urban youth in skilled employment
• Achieve zero waste to landfill, carbon neutrality, and a positive water
balance along with reducing our specific energy consumption and
increasing the proportion of renewable energy use
• Have one-third of our portfolio revenues comprise good and/or green
products and services: defined as products that are environmentally
superior or address a critical social issue (e.g. health, sanitation, and
disease prevention) for consumers at the bottom of the income pyramid.
These goals are supplemented by Brighter Giving, a structured
volunteering platform through which our team members can offer their
time and skills to help address a non-profit organization’s needs.
OBJECTIVES
OBJECTIVES OF THE STUDY

 TO HIGHLIGHTS THE POLICIES AND PROCEDURE OF

WORKING CAPITAL MANAGEMENT.

 TO MAKE A DETAILED ANALYSIS OF THE STRATIGIES

ADOPTED BY THE COMPANY FOR PLANNING, MONITORING
AND FINANCING WORKING CAPITAL MANAGEMENT.
 RESEARCH
METHODOLOGY

RESEARCH METHODOLOGY
 Research methodology
Research is a scientific and systematic search for pertinent
information on a specific topic
Type of Data –
 Primary Data - Primary data collected from the staff
members of the Finance Department & other depts.
 Secondary Data the company It is collected from the
financial statements, records and website

Tools & Techniques - Ratio Analysis

Research Design
It includes following Steps
 Calculations of Ratios and analyzing & interpreting the
ratios.
 Research Findings
 Suggestions
 INTRODUCTION OF THE
TOPIC

INTRODUCTION
The concept of financial management has been changing at a constant pace
About three decades ago, the scope of financial management was
circumscribed to raising of funds, wherever needed title significance used to
be given to the decision making and problem solving It would be while to
recall what henry ford remarked “money is an arm or a leg. Either use it or
lose it”.

In mid-fifties, the emphasis shifted to the wise utilization of funds. The

modern thinking of financial management gives greater importance to the
management decision making and policy Today, the financial manager is not
in a passive role of a scorekeeper of the accounting information and arranging
funds wherever directed to do so Rather he occupies a key position in a top
management and plays a dynamic role in solving the complex management
problem. He is now responsible for shaping the fortune of the enterprise and
is involved in the most vital management decision of allocation of capital It is
his duty to ensure that the funds are raised economically and rare used in the
more efficient and effective manner.

Working capital is the nerve center of financial management because it is a

most integral part, any organization, as it shows the liquidity of the company.
There are some famous line written by financial analyzer walker and Vaughn
"a good current ratio may mean a good umbrella for creditors against rainy
day but to management it reflect faculty financial, planning or presence of
(idle) assets or over capitalization."
If we do not nay sufficient attention to it then definitely some emergency
measure must be restored or business will come to dead stop. So here an
attempt is made to analyze the various component of working capital
management. The principal concern of this project is report is to how working
capital is effective through the MFG-PRO, the enterprise resources planning
(ERP package) in this company and how it is mapped on multi user online
computerized system.
Management is working capital is challenging task& analysis of working
capital particularly in developing countries like India where there is a storage
of funds, frequent changes in t monetary policies on an instrument of
controlling inflation, vast demand on bank funds, high interest rate, shortage
of goods and services luring both business houses and consumer to hoard e
inventories and existence of parallel black economy. A large part of the is
devoted in managing working capital to get the day to day need of an and
maintain large finance manager' organization. His prime marketable
securities, account receivable and inventories grease the operation time
attention is devoted to maintain sufficient liquidity in the form of cash, ns of
business adequately. He has to estimate the requirement of working capital
though the forecasting finding the optimum level of investment in various
current assets and finding the appropriate source of working capital. Too
much liquidity is a burden on profitability as they are inversely related to each
other.

Meaning and types

Working capital is useful to management, creditors to determine the
amount of resources available to meet current obligation, present
information about cash and predict future cash flow.
Current practice is based on the assumption that items classified as
current assets will be used to retire existing current liabilities and that
the measurement procedure used in valuing these item provide a valid
indicator of the amount of cash expected to be realized or paid.

Working capital analysis provides information to the manager regarding

the company’s liquidity, solvency, quality & financial measures. For
example liquidity information is provided on:
1. The ability to meet debt obligation.
2. Revenue stability.
 3. The relationship between revenue and cash flow.
4. The availability discretionary resources.
As analysis of working capital depends upon the items reported as
current assets and current liabilities. Current assets usually include items
in five categories including:
1. Cash and cash equivalents
2. Temporary investments in marketable equity and debt securities.
3. Receivables
4. Inventories
5. Prepaid items.

Detailed descriptions of these items are as under:

 Cash refers to demand deposits that are available for current
operations.
 Cash equivalents are risk free short term investments that are the
equivalents of cash and have an original maturity of 90 days or less.
 Inventories are merchandise, operating supplies, and ordinary
maintenance material and parts. Inventories are reported at their
historical cost and current value, whichever is lower
 Receivables are account receivables of all types account and notes
receivable are also a part of this category. Receivables are reported
in the financial installments at their estimated collectible amount
or net realized value.
 Temporary investments represent the investment of cash available
for current operation in marketable securities. These securities
include equity and debt securities plus other investments with
original maturity date of greater than 90 days but less than one
year. Their investments are reported at fair or current market
value.
 Prepaid includes prepaid expenses, such as insurance interest,
rents unused royalties, current paid services not yet received and
 operating supplies, prepaid items are reported at the historical cost
of remaining amounts.
 Current liabilities are those obligations whose liquidation is
expected to require the use of existing current assets. Several types
of liabilities are listed in the financial reports as currents.
 Payable are obligation incurred in the acquisition of material and
supplies. These include account payables and salaries payables.
 Advance collections are resources received in advance of the
performance of services of the delivery of goods.
 Debts arise from operation directly related to operations such as
accruals for wages, salaries, fringe benefits, leases and rentals.
 Other liabilities include those obligations whose regular and
ordinary liquidation is expected to occur within relatively short
period of time usually 12 months

Concepts of working capital

There are two concepts of working capital:
1. Balance sheet concept
2. Operating cycle or circular flow concept

A. Balance sheet concept:

There are two interpretations of working capital under balance
sheet concept:
I. Gross Working Capital
II. Net Working Capital

1. Gross 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. Thus, the gross capital is the
capital invested in the total current assets of the enterprise.
 Gross working capital = Total current assets.
2. Net working capital: 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
Net working capital = Current assets - Current liabilities
Net working capital may be positive or negative. When the current
liabilities the working capital is positive and the negative working
capital results when the current liabilities are more than current
assets.
Balance sheet concept:

Balance sheet concept include

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 accounting year.

CONSTITUENTS OF CURRENT ASSETS.

 Cash in hand and bank balances

 Bills receivables Sundry debtors.
 Short terms loans and advances
 Inventories of stock, as
1. Raw materials
2. 2 Work-in- process
3. 3. Stores and spares
4. 4. Finished goods
 Temporary Investments of surplus funds.
 Prepaid Expenses.
 Accrued Income
CURRENT LIABILITIES:
Current Liabilities are those liabilities which are intended to be paid in
the ordinary course of business within a short period of normally
accounting year
CONSTITUENTS OF CURRENT LIABILITIES
 Bills Payable.
 Sundry Creditors or Account Payable
 Accrued or Outstanding Expenses.
 Short-term Loans, advances and deposits.
 Dividend Payable
 Bank Overdraft
 Provision for taxation

Operating cycle or circular flow concept:

The circular flow concept of Working Capital is based upon

operating or Working capital cycle of a firm. The cycle starts with
the purchase of raw material and other sources and end with the
realization of cash from the sale of finished goods.
Working capital cycle
Gross Operating Cycle = RMCP+ WIPCP+FGCP+ RCP

RMCP- Raw Material Conversion Period

WIPCP-Work-in-Process Conversion Period
FGCP-Finished Goods Conversion Period
RCP- Receivables Conversion Period

Net Operating Cycle Period =

Gross Operating Cycle Period- Payable Deferral period
Main Factors Affecting Working Capital

 Nature of Business:
The requirement of working capital depends on the nature of
business. The nature of business is usually of two types:
Manufacturing Business and Trading Business. In the case of
manufacturing business it takes a lot of time in converting raw
material into finished goods. Therefore, capital remains invested
for a long time in raw material, semi-finished goods and the
stocking of the finished goods.

 Scale of Operations:
There is a direct link between the working capital and the scale of
operations. In other words, more working capital is required in case
of big organizations while less working capital is needed in case of
small organizations.

 Business Cycle:
The need for the working capital is affected by various stages of the
business cycle. During the boom period, the demand of a product
increases and sales also increase. Therefore, more working capital
is needed. On the contrary, during the period of depression, the
demand declines and it affects both the production and sales of
goods. Therefore, in such a situation less working capital is
required.

 Seasonal Factors:
Some goods are demanded throughout the year while others have
seasonal demand. Goods which have uniform demand the whole
year their production and sale are continuous. Consequently, such
enterprises need little working capital.
 On the other hand, some goods have seasonal demand but the
same are produced almost the whole year so that their supply is
available readily when demanded.

 Production Cycle:
Production cycle means the time involved in converting raw
material into finished product. The longer this period, the more will
be the time for which the capital remains blocked in raw material
and semi-manufactured products.

 Availability of Raw Material:

Availability of raw material also influences the amount of working
capital. If the enterprise makes use of such raw material which is
available easily throughout the year, then less working capital will
be required, because there will be no need to stock it in large
quantity.

 Inflation:
Inflation means rise in prices. In such a situation more capital is
required than before in order to maintain the previous scale of
production and sales. Therefore, with the increasing rate of
inflation, there is a corresponding increase in the working capital.

 Level of Competition:
High level of competition increases the need for more working
capital. In order to face competition, more stock is required for
quick delivery and credit facility for a long period has to be made
available.
 IMPORTANCE OF WORKING CAPITAL

 HIGHER RETURN ON CAPITAL

Firms with lower working capital will post a higher return on capital so
shareholders will benefit from a higher return for every dollar invested in
the business.
 IMPROVED CREDIT PROFILE AND SOLVENCY
The ability to meet short-term obligations is a pre-requisite to long-term
solvency and often a good indication of counterparty’s credit risk.
Adequate working capital management will allow a business to pay on
time its short-term obligations which could include raw materials,
salaries, and other operating expenses.
 HIGHER PROFITABILITY
According to a research conducted by Tauringana and Adjapong Afrifa,
the management of account payables and receivables is an important
driver of small businesses’ profitability.
 HIGHER LIQUIDITY
A large amount of cash can be tied up in working capital, so a company
managing it efficiently could benefit from additional liquidity and be less
dependent on external financing. This is especially important for smaller
businesses as they typically have a limited access to external funding
sources. Also, small businesses often pay their bills in cash from earnings
so an efficient working capital management will allow a business to
better allocate its resources and improve its cash management.
 INCREASED BUSINESS VALUE
Firms with more efficient working capital management will generate
more free cash flows which will result in a higher business valuation and
enterprise value.
  FAVORABLE FINANCING CONDITIONS
A firm with a good relationship with its trade partners and paying its
suppliers on time will benefit from favorable financing terms such as
discount payments from its suppliers and banking partners.
 UNINTERRUPTED PRODUCTION
A firm paying its suppliers on time will also benefit from a regular flow of
raw materials, ensuring that the production remains uninterrupted and
clients receive their goods on time.
 DATA ANALYSIS
&
INTERPRETATION
 WORKING CAPITAL ANALYSIS

BALANCE SHEET CONCEPT:

GROSS WORKING CAPITAL = TOTAL CURRENT

ASSETS
NET WRKING CAPITAL = CURRENT ASSETS –
CURRENT LIABILITIES

CURRENT ASSETS:
PARTICULAR 2016-17 2015-16
INVENTORIES 5020.34 4879.48
SUNDRY DEBTORS 1265 1285
CASH AND BANK BALANCE 234.91 200.92
OTHER CURRENT ASSETS 299.37 335.53
LOAN AND ADVANCES 1571.8 1370.23
TOTAL 8390 8070
CURRENT LIABILITIES:
PARTICULARS 2016-17 2015-16
CURRENT LIABILITIES 8742.44 8206.39
PROVISIONS 26.56 22.60
TOTAL 8769 8229

NET WRKING CAPITAL = CURRENT ASSETS – CURRENT

LIABILITIES

PARTICULARS 2016-17 2015-16

CURRENT ASSETS 8393.87 8069.79
CURRENT LIABILITIES 8742.44 8206.39
Working Capital -348.57 -136.60
OPERATING CYCLE CONCEPT:

Gross operating cycle = RMCP + WIPCP + FGCP + RCP

Net operating cycle period = gross operating cycle period – payable deferral period

A. Inventory conversion period: The inventory conversion

period is the time required to obtain materials for a
product, manufacture it, and sell it. The inventory
conversion period is essentially the time period during
which a company must invest cash while it converts
materials into a sale. The calculation is:

PARTICULARS 2016-17 2015-16

Inventory 4949.91 4637.5
Cost of goods sold 4727.59 3686.28
Inventory conversion 384.21 462.02
period
 B. Receivable conversion period: Receivable conversion
period is the time between the sale of the final product on
credit and cash receipts for the accounts payable.
Receivables conversion period is also known as Average
Collection Period. Average Collection Period measures the
average number of days it takes for the company to collect
revenue from its credit sales. The company will usually
state its credit policies in its financial statement, so the
average collection period can be easily measured as to
whether or not it is indicating positive or negative
information.

Receivable conversion period = Debtors

________________ * 365
Net sales

PARTICULARS 2016-17 2015-16

Debtors 876.22 727.99
Net sales 8243.73 7383.97
Receivable conversion 38.79 35.98
period
 FINDINGS
 Allocation of working capital to its various segments is
done on the basis of number of so required.
 Working capital is reviewed at regular intervals.
 At GCPL General Manger looks after the management
whereas capital is looked by the finance manager.
 Optimum level of cash balance is determined by the
means of cash management and cash report is
prepared daily.
 In case cash balance goes below the minimum
desirable level then GCPL meet its requirement by
utilizing bank credit line.
 The level of investment in receivable is determined by
making sales forecast.
 Maximum level of inventory is determined on the
basis of primary consideration like supply condition of
goods, future production plan etc.
 Working capital is generally financed through share
capital, long term, short term, loan etc. The acquire
working capital against the pledge of inventory and
book debts
 CONCLUSION

 It may be concluded, after going through policies and

practices framed by GCPL in the field of working capital
management that it has built up this system manually and
also through computer.

 It is appreciable that within a short life span GCPL,

Malanpur, has built such a working capital management
system which contributes positively towards the realization
of the company's objectives.
 SUGGESTIONS
 Instead of acquiring working capital against the pledge of
inventory & book debts, the company must adopt the policy
of "retention of profits" into the business.
 Customers sometimes enhance their orders & desire to
make the payment of the enhanced portion together with
the reminder resulting in holdup So, the company must
collect their dues on the specified date.
 Excess stock of inventory and shortage of inventory both
the condition can be harmful to the company therefore, the
company must try to maintain an optimum level of
inventory.
 Company should meet the small cash requirement by their
own sources instead of utilizing bank credit.
 GCPL, should try to minimize their expenses so that they
can provide goods of better quality at economic rate and
can earn more profit with good public image.
 The company can enhance the time lag between the
purchase time & the payment time to utilize the available
fund more efficiently
 The company should try to invest more in current assets to
meet out its requirement of working capital.