Chapter-1

Introduction
1.1 Industry profile
1.2 Company Profile
1.3 Management of the company
1.4 Vision of the Company
1.5 Governance & Values
1.6 Guiding Principles
1.7 The Mawana Sugars Brand
1.8 Future Trends of Mawana
1.9 Operational Subsidiary/ Associate companies
♦ Siel Industrial Estate Limited
♦ About Siel Chemical Complex
♦ Siel Chemical Complex Products
1.10 Major competitors
1.11 Social Face of Mawana Sugars

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1.1 Industry Profile

India is the largest consumer and second largest producer of sugar in the world.
The Indian sugar industry is the second largest agro-industry located in the rural
India. The Indian sugar industry has a turnover of Rs. 500 billion per annum and it
contributes almost Rs. 22.5 billion to the central and state exchequer as tax, cess,
and excise duty every year.

It is the second largest agro-processing industry in the country after cotton

textiles. With 453 operating sugar mills in different parts of the country, Indian
sugar industry has been a focal point for socio-economic development in the rural
areas. About 50 million sugarcane farmers and a large number of agricultural
laborers are involved in sugarcane cultivation and ancillary activities, constituting
7.5% of the rural population. Besides, the industry provides employment to about 2
million skilled/semi skilled workers and others mostly from the rural areas.

The industry not only generates power for its own requirement but surplus power
for export to the g r i d based o n byproduct bagasse. It also produces ethanol ,
an ecology friendly and renewable energy for blending with petrol.

The sugar industry in the country uses only sugarcane as input, hence sugar
Companies have been established in large sugarcane growing states like Uttar
Pradesh, Maharashtra, Karnataka, Gujarat, Tamil Nadu, and Andhra Pradesh. These
six states contribute more than 85% of total sugar production in the country; Uttar
Pradesh and Maharashtra together contribute more than 57% of total production.In
India, around 90 per cent of the sugarcane cultivation is under irrigated land.The
crop grows for 8-14 months. Sugar production is cyclical in nature and is highly
unpredictable.

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 The major sugar producers in India are :

• Mawana Sugars
• Bajaj Hindustan Ltd.
• Simbhaoli Sugars
• Dhampur sugar ltd

Four factors determine sugar production in India:

• Area under sugarcane production (Max. acreage of 4.43 million hectare)
• Sugarcane yield per hectare (Max. yield of 71.3 tonnes per hectare)
• The production of sugarcane that is crushed by sugar factories in relation to the
total sugarcane produced (Max drawl percentage = 69%)
• Recovery of sugar (Max recovery = 10.48%)

1.2 Company Profile

Presence: Mawana Sugars Limited is the seventh largest private sector sugar
manufacturer in India; the Company was formed through a business and financial
restructuring in December 2003, when it acquired the sugar business of the
conglomerate Siel Ltd; besides, Nanglamal Sugar Limited, an erstwhile subsidiary,
was merged with MSL with effect from 1.10.04.

Location : Mawana’s will have an installed capacity of 29,000 TCD cane crush
with effect from 2006-07 season and this is spread across manufacturing units at
Mawana, Titawi and Nanglamal; these are located in the fertile cane-rich region of
West Uttar Pradesh in India.

Experience: Although Mawana Sugars is a new Company, its Mawana unit has
been in business for more than 50 years; its Titawi sugar unit, which commenced
operations in February 1993, is still considered to be one of the best sugar mills in
India; its newest unit at Nanglamal went on stream on 10th January 2006.

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 Products: Mawana Sugars pioneered the manufacture of branded retail sugar with
its ‘Mawana’ brand of sugar in India in 1994. Available in retail packs of 1 kg and
5 kgs, the brand has emerged as the largest selling retail sugar pack in India,
commanding a premium in a competitive marketplace. Besides, the Company is
also a preferred supplier to brand-enhancing institutional giants such as Nestle,
Coca Cola, Pepsi, JoyCo, Perfetti, Hamdard, Dabur and NCCF.

1.3 Management of the Company

The Board of Directors of Mawana Sugars comprise of:

• Mr. Siddharth Shriram (Chairman & Managing Director)

• Mr. Sunil Kakria (Managing Director)
• Mr. K.P. Singh (Whole Time Director)
• Mr. A K Mehra (Whole Time Director)
• Prof. Dinesh Mohan (Director)
• Mr. N K Goila (Director)
• Mr. Ravi Vira Gupta (Director)
• Mr. R S Bedi (Director)
• Ms. Anuradha Dutt (Director)

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1.4 Vision of the Company

To harness renewable natural resources effectively

Mawana Sugars will remain a Company that produces products from annually
renewable natural resources, its established core competence

to make and distribute quality products needed by the society,

The Company will not venture into products that do not enhance community value,
either presently or in the long run.

using evolving goals and techniques to create sustainable value

The Company will use the best plants, processes and practices to create enduring value

in harmony with the environment, the community, stakeholders

The Company will collaborate with its stakeholders, not exploit them

and own self.

The Company will strive to strike a chord with the inner self of every associate

Vision Statement

To harness renewable natural resources effectively to make and distribute quality

products needed by the society, using evolving goals and techniques to create sustainable
value in harmony with the environment, the community, the stakeholders and own self.

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1.5 Governance and Value

Corporate governance

At Mawana Sugars Limited it is believed that stakeholder value can indeed be protected
through a sound governance process.

The purpose of the code of conduct is to create an environment where all Board and
senior management members respond consistently to an ethical standard through the
following initiatives:

• Honest and ethical conduct.

• Create a corporate climate in which the integrity and dignity of each individual is
valued and promoted.
• Assure compliance with laws, rules and regulations that govern the Company's
business activities.
• Assure the proper use of the Company’s assets.
• Abstain from indulging in an activity that adversely affects the image of the
Company.

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1.6 Guiding Principles

Some of the guiding principles are:

• Fair dealing: The Board members and senior management of the Company shall
deal with each other fairly, respecting all individuals, non-compliance attracting
disciplinary action.

• Discrimination and harassment: The Company provides a workplace free of

discrimination and harassment based on race, color, religion, age, gender,
national origin, disability, veteran status or any other biases. An officer or
associate may lodge a complaint of discrimination or harassment to the
Managing Director of the Company in case of discrimination.

• Confidential information: Confidential information (technical, operational or

commercial) should not be disclosed to anyone. Such information is confidential
and for exclusive use of the Company.

• Employee relationships: The Company continually strives to promote positive

and productive working relationships among its officers to fully comply with the
letter and spirit of all laws, prohibiting discrimination and other gender-related
harassment.

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1.7 The Mawana Sugars Brand

♦ Pioneered in 1992: Intentions

o From commodity to packaged
o Clean/Hygiene
o Correct weight surety
o Consistent quality surety
o Over one thousand shops and sponsorships.

♦ Today it is the largest selling sugar retail brand, with the highest brand recall
due to promotional activities like-

o Sponsorship on Red FM, which has a huge listenership

o Special edition Songs CD ‘Lamhe’ sold through retail music shops

♦ Strong Distribution Network

o Consumer pack branded sugar travels through Mawana Sugar’s well

established FMCG distribution channel reaching 10,000 retail outlets all
over Northern India along with famous oil brands such as Panghat,
Cornola, Ruby etc.

♦ New product launches

o Mawana Sugars plans to launch a premium range of refined sugar under

the brand name Mawana Sugars SELECT. The variants that will be
launched under this brand name are:
 Mawana Sugars SELECT double refined sugar
 Mawana Sugars SELECT sugar cubes
 Mawana Sugars SELECT sachets

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1.8 Future Trend of Mawana

Vital Dimensions in Cane Development

♦ Increase in Sugar recovery to 11%.

♦ Increase in Cane yield per hectare from 68MT to 80MT.
♦ Increase in cane drawn from 60% to 75%.
♦ Develop new high recovery varieties.
♦ Develop tissue culture for seed/varietal creations.

Vital Dimensions for future markets

♦ Sugar refineries: World’s best technology : Tate & Lyle Process

♦ Institutional Market shifting to refined sugar
♦ Retail market shifting to premium sugars
♦ Exports mainly of refined sugar

Vital Dimensions in Co-prosperity

♦ Agri Services Business: One stop shop/ center

♦ Strengthen relationship with farmers
♦ Benefits to community
♦ Harmony with the environment, community & stakeholders

Vital Dimensions in Leveraging Investments

♦ Cogeneration of power throughout the year

♦ Stability of power supply
♦ Ability to process raws throughout the year

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 ♦ Better prospects of developing direct customers

1.9 Operational Subsidiary/Associate Companies

♦ Siel Industrial Estate Limited

This Company was incorporated for the setting up of an Industrial Estate in district
Rajpura, Punjab pursuant to a Memorandum of Understanding entered into between
Mawana Sugars Limited (Formerly known as Siel Limited) and the State Government of
Punjab.

Siel Industrial Estate Limited acquired 540 acres of land out of which 118.3 acres have
been sold to various parties including Mawana Sugars for setting up of its Chemical
Plant.

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♦ About Siel Chemical Complex

Siel Chemical Complex (SCC) is a leading Chlor Alkali manufacturer in North India. It
manufactures Caustic Soda (Flakes & Lye), Hydrochloric Acid, Stable Bleaching Power,
Sodium Hypochlorite, Hydrogen and Liquid Chlorine.

SCC is located in an Industrial Estate in village Charatrampur, Village, Khadauli/

Sadargarh, P.B.No.52, Rajpura, Punjab. It has proximity to markets and is catering to the
ever-growing requirement of agro-based paper and textile businesses.

SCC operates on power supplied by the Punjab State Electricity Board .It has the option
of wheeling power from other states when wheeling costs become viable. SCC draws
water from the Bhakra Canal and is not dependant on ground water. The caustic soda
plant at SCC has an installed capacity of 240 TPD with a provision to convert 100 TPD
into Flakes. The quality of Flakes is the best available.

The manufacturing process is based on the environment friendly Membrane Cell

Technology acquired from Ineos Enterprises Limited, U.K (‘ICI’). The technology
involved consists of fine control of all process parameters, ensured through the world’s
most sophisticated Distributed Control System (DCS). Safe operation is an integral part
of the DCS.

Also located in SCC are two units of 100 MT/day HCl of Le-carbon.

SCC has entered into third-party manufacturing arrangements with manufacturers of

Chlorinated Paraffin Wax which can consume up to 2000 MT/month of Chlorine. It also
has third – party manufacturing arrangements for bottling of Hydrogen.

All the products manufactured, conform to BIS standards. The Company is ISO 9001-
2000 certified for the manufacture of Stable Bleaching Powder.

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♦ Siel Chemical Complex Products

1. Caustic Soda Lye

2. Caustic Soda Flakes

3. Stable Bleaching Powder

4. Liquid Chlorine

5. Bleach Liquor

6. Hydrochloric Acid

1.10 Major Competitors

1. The Simbhaoli Sugar Mills Ltd.

2. Bajaj Hindustan Ltd.
3. Triveni Engg. & Industries Ltd.
4. The Dhampur Sugar Mills Ltd.
5. Balrampur Chini Mills Ltd.

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1.11 Social Face of Mawana Sugars

A business unit doesn’t exist to generate surplus alone, rather it is a constituent of the
composite social structures and systems and as a responsible member of the society it is
incumbent upon business organizations to relate with the society as a whole and the
surrounding community in particular by working for their betterment and welfare.

At Mawana Sugars it is their continuous endeavor to evolve and initiate activities for the
development and betterment of the surrounding community in Rajpura and several
programs have been initiated to achieve this noble goal.

To promote the cultural heritage of nation they had organized Dance and Drama ‘RAM’
shows by the internationally renowned troupe, SBKK, for the local community. A
number of health checkup camps and sports activities had been organized for the
surrounding villages. School children are being regularly invited to their organization on
occasions such as World Environment Day to promote environmental awareness through
activities like tree plantations, painting competitions, debates and discussions etc.
Extending their initiatives further, they have also adopted a linear stretch of land in the
Rajpura city and worked on improving its aesthetic look by way of plantation and
beautification.

People at Mawana Sugars, as responsible corporate citizens, believe that such interface
with the community is a continuous process and it shall continue to evolve in the times
to come.

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 Chapter-2

Research
Methodology
2.1 Research Approach
2.2 Scope of the study
2.3 Objectives of the study
2.4 Data sources
♦ Primary data
♦ Secondary data
2.5 Limtations of the study

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2.1 Research Approach

The tools I have adopted for my study, which basically analyze critically financial
position of the organization are:

Profit & Loss A/C

Balance Sheet
The methodology I have opted for the working capital analysis of the company includes:

Ratio Analysis
 Research Design: Descriptive Study
 Data Type: Secondary Data
 Research Instrument: Ratio Analysis
 Sample: Mawana, Titawi & Nanglamal
 Method: Study of Annual Reports of the company

The present project is Descriptive in nature. The major purpose of the descriptive
research is the description of the state of the affairs as it exists at present. The main
characteristics of this method are that the researcher has no control over the variables; he
can only report what has happened or what is happening.

The above parameters are used for studying Working Capital Management of the company.

With the help of ratio analysis, the significant ratios representing the working capital
status of the company have been compared to the ideal norms represented by the average
of the ratios of other companies in the similar industry. With the evaluation of each
component which forms the current assets & current liabilities of the company, the
working capital position from different angles is tried to be presented in well and
systematic manner.
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2.2 Scope of the Research

♦ Provides all the crucial information about Mawana Sugars Limited required for
working capital assessment.
♦ Data is supplemented with details about history of Mawana Sugars Limited, key
executives, business description, locations and subsidiaries as well as a list of
products and services.

2.3 Objectives of the study

1. To get an insight into the Working capital Management issues faced by the company.

2. To get an idea about where the company stands when compared with the industry
averages with regard to working capital management.

2.4 Data Sources

Primary Data

Data observed or collected directly from first-hand experience is termed as primary data. In primary
data collection, data is collected using methods such as interviews and questionnaires. The key
point here is that the data thus collected is unique to the researcher & the research and, until
published, no one else has access to it.

But as far as the project is concerned, no primary data has been used in it.

Secondary Data

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Published data and the data collected in the past or by other parties is called secondary
data.

For the project, the secondary data was collected by referring through annual reports of
the company & internet.

2.5 Limitations of the study

1. The project report doesn’t reveal the reasons for losses incurred by the company
since past 4 years despite such good ratios when compared to the industry norms.
2. It explains the position of the current assets & liabilities of the company, but
ignores the profit & loss aspect of the company.

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 Chapter-3
Literature Review
3.1 Meaning of Working Capital
3.2 Classification of Working Capital
3.3 Importance of Adequate Working Capital
3.4 Disadvantages of Excessive Working Capital
3.5 Disadvantages of Inadequate Working Capital
3.6 Determinants of Working Capital Requirement
3.7 Management of Working Capital
3.7.1 Management of Cash
3.7.2 Management of Inventory
3.7.3 Management of Accounts Receivables

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3.1 Meaning of Working Capital

Capital required for a business can be classified under two main categories via,

1) Fixed Capital

2) Working Capital

Every business needs funds for two purposes for its establishment and to carry out
its day- to-day operations. Long terms funds are required to create production facilities
through purchase of fixed assets such as plant & machinery, land, building, furniture,
etc. Investments in these assets represent that part of firm’s capital which is blocked on
permanent or fixed basis and is called fixed capital. Funds are also needed for short-term
purposes for the purchase of raw material, payment of wages and other day – to- day
expenses etc. These funds are known as working capital. In simple words, working
capital refers to that part of the firm’s capital which is required for financing short- term
or current assets such as cash, marketable securities, debtors & inventories. Funds, thus,
invested in current assts keep revolving fast and are being constantly converted into cash
and this cash flows out again in exchange for other current assets. Hence, it is also
known as revolving or circulating capital or short term capital.

There are two concepts of working capital:

1. Gross working capital

2. Net working capital

The Gross Working Capital is the capital invested in the total current assets of the
enterprises.Net Working Capital is the excess of Current assets over Current liabilities

Net working capital can be positive or negative. When the current assets exceeds the
current liabilities are more than the current assets. Current liabilities are those liabilities,

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which are intended to be paid in the ordinary course of business within a short period of
normally one accounting year out of the current assts or the income of business.

3.2 Classification of Working Capital

Working capital may be classified in to ways:

♦ On the basis of concept

♦ On the basis of time.

On the basis of concept working capital can be classified as gross working capital and
net working capital. On the basis of time, working capital may be classified as:

♦ Permanent or fixed working capital.

♦ Temporary or variable working capital

Permanent or Fixed Working Capital

Permanent or fixed working capital is minimum amount which is required to ensure

effective utilization of fixed facilities and for maintaining the circulation of current
assets. Every firm has to maintain a minimum level of raw material, work- in-process,
finished goods and cash balance. This minimum level of current assts is called
permanent or fixed working capital as this part of working is permanently blocked in
current assets. As the business grow the requirements of working capital also increases
due to increase in current assets.

Temporary or Variable Working Capital

Temporary or variable working capital is the amount of working capital which is

required to meet the seasonal demands and some special exigencies. Variable working
capital can further be classified as seasonal working capital and special working capital.
The capital required to meet the seasonal need of the enterprise is called seasonal

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working capital. Special working capital is that part of working capital which is required
to meet special exigencies such as launching of extensive marketing for conducting
research, etc.Temporary working capital differs from permanent working capital in the
sense that is required for short periods and cannot be permanently employed gainfully in
the business.

3.3 Importance of Adequate Working Capital

♦ Solvency of the business: Adequate working capital helps in maintaining the

solvency of the business by providing uninterrupted of production.
♦ Goodwill: Sufficient amount of working capital enables a firm to make prompt
payments and makes and maintain the goodwill.
♦ Easy loans: Adequate working capital leads to high solvency and credit
standing can arrange loans from banks and other on easy and favorable terms.
♦ Cash Discounts: Adequate working capital also enables a concern to avail
cash discounts on the purchases and hence reduces cost.
♦ Regular Supply of Raw Material: Sufficient working capital ensures
regular supply of raw material and continuous production.
♦ Regular Payment of Salaries, Wages and Other Day TO Day
Commitments: It leads to the satisfaction of the employees and raises the
morale of its employees, increases their efficiency, reduces wastage and costs
and enhances production and profits.
♦ Exploitation of favorable Market Conditions: If a firm is having
adequate working capital then it can exploit the favorable market conditions such
as purchasing its requirements in bulk when the prices are lower and holdings its
inventories for higher prices.
♦ Ability to face crises: A concern can face the situation during the depression.

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 ♦ Quick and Regular Return on Investments: Sufficient working capital
enables a concern to pay quick and regular of dividends to its investors and gains
confidence of the investors and can raise more funds in future.
♦ High Morale: Adequate working capital brings an environment of securities,
confidence, high morale which results in overall efficiency in a business.

♦ Excess or Inadequate Working Capital

Every business concern should have adequate amount of working capital to run its
business operations. It should have neither redundant or excess working capital nor
inadequate nor shortages of working capital. Both excess as well as short working
capital positions are bad for any business. However, it is the inadequate working capital
which is more dangerous from the point of view of the firm.

3.4 Disadvantages of Redundant or Excessive Working

Capital

1. Excessive working capital means ideal funds which earn no profit for the
firm and business cannot earn the required rate of return on its investments.

2. Redundant working capital leads to unnecessary purchasing and

accumulation of inventories.

3. Excessive working capital implies excessive debtors and defective credit

policy which causes higher incidence of bad debts.

4. It may reduce the overall efficiency of the business.

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 5. If a firm is having excessive working capital then the relations with banks
and other financial institution may not be maintained.

6. Due to lower rate of return n investments, the values of shares may also fall.

7. The redundant working capital gives rise to speculative transactions.

3.5 Disadvantages of Inadequate Working capital

Every business needs some amounts of working capital. The need for working capital
arises due to the time gap between production and realization of cash from sales. There
is an operating cycle involved in sales and realization of cash. There are time gaps in
purchase of raw material and production; production and sales; and realization of cash.

Thus working capital is needed for the following purposes:

♦ For the purpose of raw material, components and spares.

♦ To pay wages and salaries.
♦ To incur day-to-day expenses and overload costs such as office expenses.
♦ To meet the selling costs as packing, advertising, etc.
♦ To provide credit facilities to the customer.
♦ To maintain the inventories of the raw material, work-in-progress, stores and spares
and finished stock.

For studying the need of working capital in a business, one has to study the business
under varying circumstances such as a new concern requires a lot of funds to meet its
initial requirements such as promotion and formation etc. These expenses are called
preliminary expenses and are capitalized. The amount needed for working capital
depends upon the size of the company and ambitions of its promoters. Greater the size of
the business unit, generally larger will be the requirements of the working capital.

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The requirement of the working capital goes on increasing with the growth and
expensing of the business till it gains maturity. At maturity the amount of working
capital required is called normal working capital.

3.6 Factors determining the Working Capital Requirements

1. Nature of Business: The requirement of working capital is closely related to the

nature of the business. A business having a longer operating cycle requires huge amount
of working capital (firms producing capital goods or selling goods on installments) &
vice-versa.

2. Size of the Business: Greater the size of the business, greater is the requirement
of working capital.

3. Production Policy: If the policy is to keep production steady by accumulating

inventories it will require higher working capital.

4. Length of Production Cycle: The longer the manufacturing time the raw
material and other supplies have to be carried for a longer in the process with
progressive increment of labor and service costs before the final product is obtained. So
working capital is directly proportional to the length of the manufacturing process.

5. Seasonal Variations: Generally, during the busy season, a firm requires larger
working capital than in slack season.

6. Working Capital Cycle: The speed with which the working cycle completes one
cycle determines the requirements of working capital. Longer the cycle larger is the
requirement of working capital.

7. Rate of Stock Turnover: There is an inverse co-relationship between the question

of working capital and the velocity or speed with which the sales are affected. A firm

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having a high rate of stock turnover will need lower amount of working capital as
compared to a firm having a low rate of turnover.

8. Credit Policy: A concern that purchases its requirements on credit and sales its
product / services on cash requires lesser amt. of working capital and vice-versa.

9. Business Cycle: In period of boom, when the business is prosperous, there is need
for larger amt. of working capital due to rise in sales, rise in prices, optimistic expansion
of business, etc. On the contrary in time of depression, the business contracts, sales
decline, difficulties are faced in collection from debtor and the firm may have a large
amt. of working capital.

10. Rate of growth of business: In faster growing concern, we shall require large
amt. of working capital.

11. Earning Capacity & Dividend Policy: Some firms have more earning capacity
than other due to quality of their products, monopoly conditions, etc. Such firms may
generate cash profits from operations and contribute to their working capital. The
dividend policy also affects the requirement of working capital. A firm maintaining a
steady high rate of cash dividend irrespective of its profits needs more working capital
than the firm that retains larger part of its profits and does not pay so high rate of cash
dividend.

12. Price level Changes: Changes in the price level also affect the working capital
requirements. Generally rise in prices leads to increase in working capital.

3.7 Management of Working Capital

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Management of working capital is concerned with the problem that arises in attempting
to manage the current assets, current liabilities. The basic goal of working capital
management is to manage the current assets and current liabilities of a firm in such a
way that a satisfactory level of working capital is maintained, i.e. it is neither adequate
nor excessive as both the situations are bad for any firm. There should be no shortage of
funds and also no working capital should be ideal. Working Capital Management
Policies of a firm has a great on its probability, liquidity and structural health of the
organization.

3.7.1 Management of CASH

Management of a firm's current assets starts with the management of cash. Cash
provides the liquidity needed to meet everyday obligations owed to creditors and
suppliers and the flexibility to take advantage of new opportunities that may arise.
Managing cash is a tricky issue for many firms; cash is a necessary component of daily
operations, yet cash is a non-earning asset. Larger corporations spend considerable time
and resources in cash management.

Cash management is a broad area having to do with the collection, concentration, and
disbursement of cash including measuring the level of liquidity, managing the cash
balance, and short-term investments.

Efficient Cash Management Strategies

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Cash management strategies are intended to minimize the operating cash balance
requirement. The basic strategies that can be employed to effectively manage cash are:

1. Delaying and stretching Accounts Payables

The firm should pay its accounts payable as late as possible without damaging its credit
standing. This is one of the main strategies of efficient cash management. But the firm
should take advantage of cash discount, if any, offered by suppliers for prompt payment.
The reason is that, the cost of not taking a discount will work out more than the cost of
delaying payment.

2. Speeding up collection of Accounts Receivables

By effective collection efforts and by speeding up the collection of accounts receivables,

the cash cycle would come down, thereby resulting in saving a cost to the firm. But the
speeding up of accounts receivables should be done very carefully so that the customers
are not lost. The average collection period of receivables can be reduced by changes in
credit terms, credit standards and collection policies. Cash discounts should be given for
immediate payments or payments within 10 days of invoice to encourage customers to
speed up the payments.

3. Efficient Inventory-Production Management

Another strategy is to increase the inventory turnover, avoiding stock-outs or shortage of

stocks, by the following ways:

a. Increasing the raw materials turnover by using more efficient inventory

control techniques.
b. Decreasing the production cycle through better production planning,
scheduling and control techniques, which will lead to an increase in the
work-in-progress inventory turnover.

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 c. Increasing the finished goods turnover through better forecasting of
demand and a better planning of production.

4. Combined cash management strategies

Each one of the above cash management strategies has a favorable effect on the
operating cash requirement. If all of the above strategies are combined effectively, it will
lead to the most efficient cash management system.

3.7.2 Management of INVENTORY

A third aspect of current asset management involves the management of inventories.

Inventory management is concerned with keeping enough product on hand to avoid
running out while at the same time maintaining a small enough inventory balance to
allow for a reasonable return on investment. Proper inventory management is important
to the financial health of the corporation; being out of stock forces customers to turn to
competitors or results in a loss of sales. Excessive level of inventory, however, results in
large inventory carrying costs, including the cost of the capital tied up in inventory
warehouse fees, insurance etc. A major problem with managing inventory is that the
demand for a corporation's product is to a degree uncertain. The supply of the raw
materials used in its production process is also somewhat uncertain. In addition, the
corporation's own production contains some degree of uncertainty due to possible
equipment breakdowns and labour difficulties. Because of these possibilities, Inventory
acts as a shock absorber between product demand and product supply. If product
demand is greater than expected, inventory can be depleted without losing sales until
production can be stepped up enough to select the unexpected demand. However,
inventory is difficult to manage because it crosses many lines of responsibility.

The purchasing manager is responsible for supplies of raw material and would like to
avoid shortages and to purchase in bulk in order to take advantage of quantity discounts.

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The production manager is responsible for uninterrupted production & wants to have
enough raw materials & work-in-process inventory on hand to avoid disruption in
production process.

The marketing manager is responsible for selling the product and wants to minimize
the chances of running out of inventory.

The financial manager is concerned about achieving an appropriate overall rate of

return. Funds invested in inventory are idle and do not earn a return.

Types of inventories

1. Raw-Materials
An inventory of raw materials allows separation of production scheduling from
arrival of basic inputs to the production process. Factors affecting the amount of the
raw materials inventory include proximity to the supplier, relationship with the
supplier, predictability of the production process, lead time required to place an
order, and transportability and perishability of materials.

2. Work-in-Process
An inventory of partially completed units allows the separation of different phases of
the production process. The amount of work-in-process inventory is in part a
function of the type of product, the measurement period, and the nature of the
production process.
3. Finished-Goods
An inventory of finished goods allows separation of production from selling. With a
stock of finished merchandise on hand, a firm can fill orders as they are received
rather than depend upon the completion of production to satisfy customer demands.

Working Capital Management at Mawana Sugars Page 29

 3.7.3 Management of ACCOUNTS RECEIVABLES

Another critical issue is the management of accounts receivable. Receivables are

money owed to the firm that has not yet been collected. The management of accounts
receivable involves the determination and implementation of the firm's credit policy such
as how long customers are allowed to pay for merchandise or services received and cash
discounts for immediate rather than deferred payment. A tight credit policy may result in
missed sales opportunities, since fewer potential customers will qualify for credit sales.
Conversely, liberal credit terms may result in longer average collection periods and
greater uncollected accounts. There are real costs associated with these issues, and
managers must work to find appropriate trade-offs that result not only in higher sales,
but also in the greatest profitability.

A concern may sell its goods on cash as well as on credit to increase its sales and a
liberal credit policy may result in tying up substantial funds of a firm in the form of trade
debtors. Trade debtors are expected to be converted into cash within a short period and
are included in current assets. So liquidity position of a concern also depends upon the
quality of trade debtors.

Chapter-4
Working Capital Management at Mawana Sugars Page 30
 Data Analysis &

Interpretation
4.1 Working Capital Cycle of Sugar Industry
4.2 Working Capital Analysis (Ratio Analysis)
4.2.1 Management of Cash
4.2.1a. Current ratio
4.2.1b. Quick ratio
4.2.1c. Absolute ratio
4.2.2 Management of Inventory
4.2.2a. Inventory Turnover Ratio
4.2.2b. Inventory Conversion Period
4.2.3 Management of Accounts Receivables
4.2.3a. Debtors Turnover Ratio
4.2.3b. Average Collection Period

4.1 Working Capital Cycle of Sugar Industry

♦ SUPPLIER – farmer
♦ RAW MATERIAL - sugar cane
♦ WIP – industrial alcohol , juice in the form of thick syrup
♦ Finished product – granulated sugar , brown sugar, liquid sugar
♦ Sales to customer (Debtors)

Working Capital Management at Mawana Sugars Page 31

 ♦ Cash from customers

CASH

SUPPLIERS

DEBTORS
WORKING

CAPITAL

CYCLE
RAW
MATERIAL
S
FINISHED
GOODS
WIP

4.2 Working Capital Analysis

As we know working capital is the life blood and the centre of a business. Adequate
amount of working capital is very much essential for the smooth running of the business.
And the most important part is the efficient management of working capital in right time.
The liquidity position of the firm is totally effected by the management of working
capital. So, a study of changes in the uses and sources of working capital is necessary to

Working Capital Management at Mawana Sugars Page 32

evaluate the efficiency with which the working capital is employed in a business. This
involves the need of working capital analysis.

• Ratio analysis

A ratio is a simple arithmetical expression one number to another. The technique of ratio
analysis can be employed for measuring short-term liquidity or working capital position
of a firm. The following ratios can be calculated for these purposes:

Liquidity Ratios

a. Current ratio.

b. Quick ratio (4.2.1 Cash Management)

c. Absolute liquid ratio

Turnover Ratios

Inventory turnover Ratio (4.2.2 Inventory Management)

Receivables turnover Ratio (4.2.3 Accounts Receivables Management)

4.2.1 Management of Cash (liquidity ratios)

Liquidity refers to the ability of a firm to meet its current obligations as and when these
become due. The short-term obligations are met by realizing amounts from current,
floating or circulating assts. The current assets should either be liquid or near about
liquidity. These should be convertible in cash for paying obligations of short-term

Working Capital Management at Mawana Sugars Page 33

nature. The sufficiency or insufficiency of current assets should be assessed by
comparing them with short-term liabilities. If current assets can pay off the current
liabilities then the liquidity position is satisfactory. On the other hand, if the current
liabilities cannot be met out of the current assets then the liquidity position is bad. To
measure the liquidity of a firm, the following ratios can be calculated:

4.2.1a. Current Ratio

4.2.1b. Quick Ratio

4.2.1c. Absolute Ratio

4.2.1a. Current Ratio

Current Ratio, also known as working capital ratio is a measure of general liquidity and
its most widely used to make the analysis of short-term financial position or liquidity of
a firm. It is defined as the relation between current assets and current liabilities. Thus,

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITES

Current assets include cash, marketable securities, bill receivables, sundry debtors,
inventories and work-in-progresses. Current liabilities include outstanding expenses, bill
payable, dividend payable etc.

A relatively high current ratio is an indication that the firm is liquid and has the ability to
pay its current obligations in time. On the hand a low current ratio represents that the
liquidity position of the firm is not good and the firm shall not be able to pay its current
liabilities in time. A ratio equal or near to the rule of thumb of 2:1 i.e. current assets
double the current liabilities is considered to be satisfactory.

Working Capital Management at Mawana Sugars Page 34

Calculation of Current Ratio

Table 4.2.1a Calculation of Current Ratio

♦ Mawana Sugars

Year 2008(Rs. in millions) 2009(Rs. in millions)

Current Assets 2434.09 3018.44
Current Liabilities 1241.23 1704.19
Current Ratio 1.96:1 1.77:1

♦ Competitors

Year 2009 Bajaj (Rs. In millions) Simbhaoli (Rs. In millions)

Current Assets 4692.3 7766.1
Current Liabilities 4144.9 6396.8
Current Ratio 1.13:1 1.21:1

Industry average: 1.17:1

Graph 4.2.1a Current ratio

Working Capital Management at Mawana Sugars Page 35

 2

1.5

1
Current Ratio
0.5

0
Mawana Mawana Competitors
2008 2009

Interpretation:

As we know that ideal current ratio for any firm is 2:1. If we see the current ratio of the
company for last two years it has decreased from 2008 to 2009. The current ratio of
company is less than the ideal ratio. But as per the industry average of current ratio
which is 1.17:1, the company has maintained its liquidity position in a far better & sound
state.

4.2.1b. Quick Ratio

Working Capital Management at Mawana Sugars Page 36

Quick ratio is a more rigorous test of liquidity than current ratio. Quick ratio may be
defined as the relationship between quick/liquid assets and current or liquid liabilities.
An asset is said to be liquid if it can be converted into cash with a short period without
loss of value. It measures the firms’ capacity to pay off current obligations immediately.

QUICK RATIO = QUICK ASSETS

CURRENT LIABILITES

Where Quick Assets are:

1) Marketable Securities

2) Cash in hand and Cash at bank.

3) Debtors.

A high ratio is an indication that the firm is liquid and has the ability to meet its current
liabilities in time and on the other hand a low quick ratio represents that the firms’
liquidity position is not good.As a rule of thumb ratio of 1:1 is considered satisfactory. It
is generally thought that if quick assets are equal to the current liabilities then the
concern may be able to meet its short-term obligations. However, a firm having high
quick ratio may not have a satisfactory liquidity position if it has slow paying debtors &
vice versa.

Table 4.2.1b Calculation of Quick Ratio

Working Capital Management at Mawana Sugars Page 37

 ♦ Mawana Sugars

Year 2008(Rs. in millions) 2009(Rs. in millions)

Quick Assets 286.97 276.58
Current Liabilities 1241.23 1704.19
Quick Ratio 0.23:1 0.16:1

♦ Competitors

Year 2009 Bajaj (Rs. In millions) Simbhaoli (Rs. In millions)

Quick Assets 97.1 673.9
Current Liabilities 4144.9 6396.8
Quick Ratio 0.02:1 0.10:1

Industry average: 0.06:1

Graph 4.2.1b Quick ratio

Working Capital Management at Mawana Sugars Page 38

 0.25

0.2

0.15
Quick Ratio
0.1

0.05

0
Mawana 2008 Mawana 2009 Competitors

Interpretation:

A quick ratio is an indication that the firm is liquid and has the ability to meet its current
liabilities in time. The ideal quick ratio is 1:1.The liquidity position of the firm may not
be necessarily bad due to low Quick Ratio. This is because the firm can have fast
moving inventory which can realize cash for the firm more easily & earlier if the debtors
are not good enough to meet the short term obligations. Thus the company’s quick ratio
may be less than the ideal ratio, but due to fast moving nature of inventory, there seem to
be no constraints in fulfilling short term obligations of the company.

4.2.1c. Absolute Liquidity Ratio

Although receivables, debtors and bills receivable are generally more liquid than
inventories, yet there may be doubts regarding their realization into cash immediately or

Working Capital Management at Mawana Sugars Page 39

in time. So absolute liquid ratio should be calculated together with current ratio and acid
test ratio so as to exclude even receivables from the current assets and find out the
absolute liquid assets, where Absolute Liquid Assets include Cash & Bank Balances.

ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITES

Table 4.2.1c Calculation of Absolute Liquiityd Ratio

♦ Mawana Sugars
Year 2008(Rs. in millions) 2009(Rs. in millions)
Absolute Liquid Assets 114.93 128.53
Current Liabilities 1241.23 1704.19
Absolute Liquid Ratio 0.09:1 0.08:1
♦ Competitors

Year 2009 Bajaj (Rs. In millions) Simbhaoli (Rs. In millions)

Absolute Liquid Assets 46.2 104.4
Current Liabilities 4144.9 6396.8
Absolute Liquid Ratio 0.011:1 0.016:1

Industry average: .013:1(approx)

Graph 4.2.1c Absolute Liquidity Ratio

Working Capital Management at Mawana Sugars Page 40

 0.1

0.08

0.06
Absolute Quick Ratio
0.04

0.02

0
Mawana 2008 Mawana 2009 Competitors

Interpretation:

This ratio shows that company carries a small amount of cash. But there is nothing to be
worried about the lack of cash because company has reserves & borrowing power. In
India, firms have credit limits sanctioned from banks and can easily draw cash. A
standard of 0.5: 1 absolute liquidity ratio is considered an acceptable norm. When
compared with the ideal ratio, it can be seen that the company carries small amount of
cash but in comparison with the other firms in this industry namely Bajaj & Simbaholi,
the company stands at a better position.

4.2.2 Management of Inventory

4.2.2a. Inventory Turnover Ratio

Working Capital Management at Mawana Sugars Page 41

 4.2.2b. Inventory conversion period

4.2.2a. Inventory Turnover or Stock Turnover Ratio:

Every firm has to maintain a certain amount of inventory of finished goods so as to meet
the requirements of the business. But the level of inventory should neither be too high
nor too low. Because it is harmful to hold more inventory as some amount of capital is
blocked in it and some cost is involved in it. It will therefore be advisable to dispose the
inventory as soon as possible.

INVENTORY TURNOVER RATIO = NET SALES

AVERAGE INVENTORY

Inventory turnover ratio measures the speed with which the stock is converted into sales.
Usually a high inventory ratio indicates an efficient management of inventory because
more frequently the stocks are sold; the lesser amount of money is required to finance
the inventory, whereas low inventory turnover ratio indicates inefficient management of
inventory. A low inventory turnover implies over investment in inventories, dull
business, poor quality of goods, stock accumulations and slow moving goods and low
profits as compared to total investment.

AVERAGE STOCK = OPENING STOCK + CLOSING STOCK

Table 4.2.2a Calculation of Inventory Turnover Ratio

♦ Mawana Sugars

Working Capital Management at Mawana Sugars Page 42

 Year 2008(Rs. in millions) 2009(Rs. in millions)
Net Sales 10158.68 6763.22
Opening stock 466.78 1331.46
Closing stock 1331.46 2042.52
Average Stock 899.12 1686.99
Inventory Turnover Ratio 11.30 4.01

♦ Competitors

Year 2009 Bajaj (Rs. In millions) Simbhaoli (Rs. In millions)

Net Sales 3693.5 6990.5
Opening stock 1200.1 1682.2
Closing stock 1071.4 4299.7
Average Stock 2271.5 2990.95
Inventory Turnover Ratio 1.74:1 2.33:1

Industry average: 2.035:1

Graph 4.2.2a Inventory Turnover Ratio

Working Capital Management at Mawana Sugars Page 43

 12

10

6
Inventory Turnover Ratio
4

0
Mawana 2008 Mawana 2009 Competitors

Interpretation:

This ratio shows how rapidly the inventory is turning into receivable through sales. In
2008 the company has high inventory turnover ratio but in 2009 it has reduced to 4.01
times. This shows that the company’s inventory management technique is less efficient
as compared to last year but when compared to the industry average of 2.035:1, the
company stands at a strong position.

4.2.2b. Inventory Conversion Period:

INVENTORY CONVERSION PERIOD = 365 (Net working days)

Working Capital Management at Mawana Sugars Page 44

 INVENTORY TURNOVER RATIO

Table 4.2.2b Calculation of Inventory Conversion Period

♦ Mawana Sugars

Year 2008 2009

Days 365 365
Inventory Turnover Ratio 11.30 4.01
Inventory Conversion Period 32.3 days 91.2 days

♦ Competitors

Year 2009 Bajaj Simbhaoli

Days 365 365
Inventory Turnover Ratio 1.74 2.33:1
Inventory Conversion Period 209.77 156.65

Industry average: 183.21 days

Graph 4.2.2b Inventory Conversion Period

Working Capital Management at Mawana Sugars Page 45

 200

150

100 InventoryConversion
Period
50

0
Mawana2008 Mawana2009 Competitors

Interpretation:

Inventory conversion period shows that how many days’ inventories take to convert
from raw material to finished goods. In the company inventory conversion period is
increasing. This shows the inefficiency of management to convert the inventory into
cash. Still when compared to the industry average of 183.21, the company’s inventory
conversion period is quite less.

4.2.3 Management of Accounts Receivables

4.2.3a. Debtors Turnover Ratio

Working Capital Management at Mawana Sugars Page 46

 4.2.3b. Average Collection Period

4.2.3a. Debtors Turnover Ratio

DEBTORS TURNOVER RATIO = NET SALES

AVERAGE DEBTORS

Debtor’s velocity indicates the number of times the debtors are turned over during a
year. Generally higher the value of debtor’s turnover ratio the more efficient is the
management of debtors/sales or more liquid are the debtors, whereas a low debtor’s
turnover ratio indicates poor management of debtors/sales and less liquid debtors.

AVERAGE DEBTORS = OPENING DEBTORS + CLOSING DEBTORS

Table 4.2.3a Calculation of Debtors Turnover Ratio

♦ Mawana Sugars
Year 2008(Rs. in millions) 2009(Rs. in millions)
Sales 7175 6763.22
Opening Debtors 63.81 172.04
Closing Debtors 172.04 148.05
Average Debtors 117.925 160.05
Debtor Turnover Ratio 60.84 42.26
♦ Competitors

Year 2009 Bajaj(Rs. In millions) Simbhaoli(Rs. In millions)

Sales 3693.5 6990.5
Opening Debtors 73.3 369.5
Closing Debtors 50.9 569.5
Average Debtors 62.1 469.5
Debtor Turnover Ratio 59.47 14.88

Working Capital Management at Mawana Sugars Page 47

Industry Average: 37.18 times

Graph 4.2.3a Debtors Turnover Ratio

70
60
50
40
30 Debtors Turnover Ratio
20
10
0
Mawana 2008 Mawana 2009 Competitors

Interpretation:

This ratio indicates the speed with which debtors are being converted or into actual
sales. The higher the values of debtors turnover, the more efficient is the management of
credit. The Debtors turnover ratio of the company stands at 42.26 which is less as
compared to the last year. This shows that the company has lessened its collection efforts
& is comparatively less efficient in handling debtors. But when compared to the industry
average which is 37.18, the company stands at a stronger place.

4.2.3b. Average Collection Period

AVERAGE COLLECTION PERIOD = 365(NET WORKING DAYS)

Working Capital Management at Mawana Sugars Page 48

 DEBTORS TURNOVER RATIO

The average collection period ratio represents the average number of days for which a
firm has to wait before its receivables are converted into cash. It measures the quality of
debtors. Generally, shorter the average collection period the better is the quality of
debtors as a short collection period implies quick payment by debtors and vice-versa.

Table 4.2.3b Calculation of Average Collection Period

♦ Mawana Sugars
Year 2008 2009
Days 365 365
Debtor Turnover Ratio 60.84 42.26
Average Collection Period 5.99 days 8.64 days
♦ Competitors

Year 2009 Bajaj Simbhaoli

Days 365 365
Debtor Turnover Ratio 59.47 14.88
Average Collection Period 6.13 days 24.5 days

Industry average: 15.3 days

Graph 4.2.3b Average Collection Period

Working Capital Management at Mawana Sugars Page 49

 16
14
12
10
8
Average Collection Period
6
4
2
0
Mawana 2008 Mawana 2009 Competitors

Interpretation:

The average collection period measures the quality of debtors and it helps in analyzing
the efficiency of collection efforts. It also helps to analyze the credit policy adopted by
company.

The company allowed a credit period of only 6 days (approx.) as per the 2008 statistics
but in 2009, this period is extended to 8.64 days which shows that it has loosened its
credit policy & lowered its collection efforts. But it still demands quick payment as
compared to the industry average of 15.3 days.

The extension in the credit period may be a step to attract more customers. This implies
that the company has the ability to manage its debtors in the desired manner to keep its
liquidity position sound.

Working Capital Management at Mawana Sugars Page 50

 Chapter-5

Findings
5.1 About Sugar Industry
5.1.1. Factors affecting Sugar Industry
5.1.2. Working Capital Requirements
5.1.3. Demand Supply Analysis
5.1.4. Industry Statistics

5.2. About Mawana Sugars

5.2.1. Inventories
5.2.2. Cash & Bank Balance
5.2.3. Debtors
5.2.4. Current Assets
5.2.5. Working Capital

5.1 ABOUT SUGAR INDUSTRY

5.1.1 Factors that affect Sugar Industry

The financial performance of a sugar factory mainly depends on the following:

Working Capital Management at Mawana Sugars Page 51

 ♦ Demand-supply position and its impact on prices
♦ Sugarcane prices
♦ Utilization of by-products
♦ Plant size and location
♦ Working capital requirement and cost of funds
♦ Interest burden

5.1.2 Working Capital Requirements of Sugar Industry

♦ Sugar is a working capital intensive industry

♦ Mainly produced between November and May
♦ Consumed throughout the year
♦ Sugar mill owners are forced to carry large inventories over a long period of time
♦ Sugar industry depends on short term funds
♦ Funds are available at high interest rates
♦ Sugar cane being the main raw material for sugar constitutes around 65% of the
cost of sugar production

5.1.3 Demand Supply Analysis

Working Capital Management at Mawana Sugars Page 52

 5.1.4 Industry Statistics

♦ During the period 2001-03 there was a relatively slower growth in demand which
resulted in massive inventory levels and high inventory holding cost

♦ Govt. decontrolled the sugar industry

♦ In 2004-06 sugar prices increased due to decline in inventory levels

♦ Average debtors days is 15.3 days

♦ Sugar inventory is generally at its peak in March due to the end of the crushing
season.

5.2 ABOUT MAWANA SUGARS

5.2.1 INVENTORIES

Working Capital Management at Mawana Sugars Page 53

 Year 2007-08 2008-09
Total Current Assets 2434.09 3018.44
Inventories 1331.46 2042.52

Interpretation:

Inventories are a major part of current assets. If any company wants to manage its
working capital efficiency, it has to manage its inventories efficiently. The data shows
that inventory in 2007-08 is 54.7% & in 2008-09 is 67.67% of their current assets.

5.2.2 CASH & BANK BALANCE

Year 2007-08 2008-09

Cash & Bank Balances 114.93 128.53

Interpretation:

Cash is basic input or component of working capital. Cash is needed to keep the business
running on a continuous basis. So the organization should have sufficient cash to meet
various requirements. This data is indicating that in 2008 the cash is 114.93 million & in
2009, it has increased to 128.53 million, thus providing the company with extra funds to
finance its operations in regular course of business.

5.2.3 DEBTORS

Year 2007-08 2008-09

Debtors 172.04 148.05

Working Capital Management at Mawana Sugars Page 54

Interpretation:

Debtors constitute a substantial portion of current assets. In India it constitutes, one third
of total current assets. The above data is depicting that there is decrease in the debtors. It
represents an contraction of the credit policy of the company for its customers. The
reason for decreasing credit can be bad debtors, early realization of money to keep
company’s liquidity position sound or company’s strict credit policy.

Average Debtors Days of the company is 8.64 days. (2009)

5.2.4 CURRENT ASSETS

Year 2007-08 2008-09

Current Assets 2434.09 3018.44

Interpretation:

This data shows that there is 24% increase in current assets in 2008. This increase is
because of 53% (approx.) increase in inventories. Increase in current assets shows the
liquidity soundness of company. But this increase should be supported by noticeable
increase in Cash & Bank balances rather than inventory which is a relatively poor
measure of company’s liquidity as compared to liquid money.

Current Assets of Mawana sugars comprise of 28.5% (approx.) of the total assets.
(2009)

5.2.5 NET WOKRING CAPITAL

Year 2007-08 2008-09

Net Working Capital 1192.86 1314.25

Working Capital Management at Mawana Sugars Page 55

Interpretation:

Working capital is required to finance day to day operations of a firm. There should be
an optimum level of working capital. It should not be too less or not too excess. In the
company there is increase in the working capital.

This increase signifies company’s expanded course of business.

Working Capital Management at Mawana Sugars Page 56

 Chapter-6

Conclusion

♦ The company has adequate working capital limits for funding of operational
requirements

♦ The Company has favorable operating efficiency, which strengthens its ability to
withstand cost and pricing pressures.

Working Capital Management at Mawana Sugars Page 57

 ♦ The end product, sugar is produced only between November and May but it must
be sold throughout the year. Inventory management at a low cost is crucial to
success as the industry dynamics require companies to hold a vast quantity
of finished goods (sugar). Raw material accounts for up to 70% of the total cost.

♦ Optimal utilization of by-products improves performance. Integrated sugar

mills which produce Bagasse, Alcohol and Power perform better than those
which only produce sugar and sell Bagasse due to higher value addition and
partial mitigation of a down turn in sugar business.

♦ Sugar Industry is highly working capital intensive. Sugar operations are

seasonal in nature. Crushing operations happen on an average around 125 days
starting October whereas sales of sugar happen throughout the year. Thus, in the
days, sugar is produced, more working capital in needed & in off season very
little working capital is needed. Companies incur fixed cost when crushing
comes to an end. All things being equal, sugar companies will have higher profits
due to lower sugar production, high domestic demand, higher sugar exports,
lower cane prices.

♦ Sugar Factories need to maintain larger stocks of sugar as the stocks are released
as per government directives which try to maintain price in the sugar market
stable so as to match supply with demand in the market.

Working Capital Management at Mawana Sugars Page 58

 Chapter-7
Recommendations

♦ The cash & bank balances of the company need to be increased a little further to
achieve the idael standard ofliquidity ratios because they form a better measure
of liquidity than any other current asset. However when compared to the industry
averages, the company holds considerably better cash & bank balances.

Working Capital Management at Mawana Sugars Page 59

 ♦ The current assets in sugar industry should form at least 60-70% of the total
assets as per the industry norms. In Mawana, current assets form only 28.5% of
the total assets which is very less as compared to the industry norms.

♦ The company produces sugar using sugar cane as a raw material, whereas its
major competitor Simbaholi sugars is even using imported raw sugar enabling it
to carry on its production throughout the year, rather than being dependent on
the 6 months production schedule by using only sugarcane as a raw material.

Working Capital Management at Mawana Sugars Page 60

 Bibliography

Company’s Internal Documents:

• Annual Reports of the company

Working Capital Management at Mawana Sugars Page 61

Websites:

• www.mawanasugars.com
• www.iitk.ac.in
• www.investopedia.com
• www.svtuition.org
• www.managementparadise.com
• www.mbaguys.com
• www.corporateinformation.com
• www.moneycontrol.com
• www.researchandmarkets.com
• www.business-standard.com
• http://info.shine.com
• www.alacrastore.com
• http://economictimes.indiatimes.com

Working Capital Management at Mawana Sugars Page 62