FINANCIAL ANALYSIS OF NATIONAL FERTILIZERS

LIMITED, NANGAL
A Project Report
Submitted to

Rajiv Gandhi Engineering College Business School,

Nagrota Bagwan (H.P.T.U)
In Partial Fulfillment for the award of degree of

MASTER OF BUSINESS ADMINISTRATION

(FINANCIAL MANAGEMENT)
2015-2016
Done at

Nangal
Under the guidance of

Mr Jivan Kumar Aery

Assistant Manager, Finance & Accounts
NFL, Nangal
Submitted by

Sonia Sharma
MBA (Financial Management)
Roll no 51MB5013501

Education becomes more meaningful when its theoretical aspects are combined with practical
experience. This provides an opportunity to the students to improve their understanding of the
studies.
MBA is a course, which combines both its theory and application as its content of study in the
field of management as a part of this course, every aspirant has to undergo at least six to eight
weeks Industrial Training in an organization of repute. The purpose of this training is to
expose the students or management sciences to real business situation and to provide insight
into the various functions carried out within the organization.
In order to use the theoretical knowledge I get the opportunity of Industrial Training in
National Fertilizers Limited Naya Nangal.
As complementary to training, I have prepared and submitted a project report on working
capital management of NFL. It is an attempt to present on account of practical knowledge and
observations gathered during the vocational training.

No job or task can be completed without the co-operation and support of people around us. I
being no exception had to seek the help of others to make this project successful.
I would like to thank Mr.Jivan Kumar Arey, Assistant Manager (F&A), NFL, Nangal,
Ms.Balvinder Kaur Assistant Manager, NFL, Nangal and various Heads of different
Departments. I thank my parents for their love, encouragement and comfort in my career.
I would like to thank Dr.Puneet Sood coordinator of MBA Department RGGEC Business
School Nagrota Bagwan (H.P) for providing me with an opportunity to undertake industrial
training, which has been a learning experience for me.
A lot of individuals have contributed in the preparation of this project. I am thankful to all of
them for their timely help encouragement, support, valuable comments, suggestions and
many innovative ideas in carrying out these projects. It is my proud privilege and pleasure to
express deep sense of gratitude to these people.
My project would not have been completed without the guidance of staff members of the
NFLs, Finance, Store, and Human Resource Development Department.

SONIA SHARMA

INDEX

CONTENTS

Page no.

Introduction to fertilizers

Introduction to fertilizer industry

Introduction to National Fertilizers Limited

Management Team

10

b Location of NFL Plants

11

14

Products

d Marketing

20

Human Resources

22

SWOT Analysis

28

National Fertilizers Limited, Nangal

31

a Organizational Chart of Finance & Accounts Dept.

33

b Working Capital

39

c Cash Management

45

d Receivables Management

48

e Inventory Management

52

f Ratio Analysis

59

g Research Methodology

63

h Summary & Conclusion

67

i Bibliography

71

j Appendix

72

FERTILIZERS are chemicals given to plants with the intention of promoting growth.
Fertilizer is defined as Any material , organic or inorganic , natural or synthetic , which
supplies one or more of the chemical elements required for the plant growth.
Sixteen elements listed in table 1.1are identified as essential elements for plant growth, of
which nine are required in macro quantities and seven in micro quantities. Of the elements
listed in Table1.1, carbon, oxygen and hydrogen are supplies by air and water and are,
therefore, not treated as nutrients by the fertilizer industry. The main aim of the industry is to
provide the secondary and primary nutrients, which are required in macro quantities.
PRIMARY NUTRIENTS
The primary nutrients are nitrogen, phosphorus, calcium and potassium. Primary nutrients are
normally supplied through chemical fertilizers. They are chemical compounds containing one
or more of the primary nutrients and are generally produced by chemical reactions. Whatever
may be the chemical compounds, its most important ingredient for plant growth is the
nutrients content. The three primary ingredients of fertilizers are listed on the fertilizer bags
as nitrogen, phosphate and potash as three numbers, indicating the ratios in that order. Thus a
5-10-5 fertilizer would have 10% phosphate in its ingredients.
SECONDARY NUTRIENTS
Secondary nutrients calcium, magnesium and sulphur are called the secondary nutrients. It is
required for plant growth in relatively smaller quantities than primary nutrients. Any
deficiency of the secondary nutrients and other essential elements reduce the efficiency of
primary nutrient by restricting the yield to low levels. Therefore, to obtain optimum results,
crops have to be supplied with secondary nutrients in addition to primary nutrients.
MICRONUTRIENTS
Micronutrients are a group of nutrients, which are essential for plant growth but are required
by plants in small quantities. Intensive cropping depletes all nutrients including
micronutrients from the soil at a fast rate. Therefore selective use of micronutrients is
necessary for increasing agricultural production. Iron, zinc, manganese, copper, boron,
molybdenum and chlorine fall under this category. Ten micronutrients namely zinc Sulphate
(monohydrate & heptahydrate) manganese Sulphate, borax, solubor; copper Sulphate,
ammonium molybdate, chelated zinc, and chealted iron have been incorparted in the
Fertilizer (control) order (FCO). Fortified fertilizers like Zincated urea and boronated single
superphosphate have also been notified under FCO.
5

Indian economy is an agriculturist economy. Agriculture production plays a very important

role in the prosperity of the country. As the production is increasing at a tremendous rate, it is
very necessary to increase production and only way to increase the production is to do
intensive cultivation with the use of chemical fertilizers.
The development of the fertilizer industry is of great importance to our National economy as;
the primary occupation of 70% of the Countrymen is agriculture. And for a good yield,
Fertilizer play, an important role. The increase in the Fertilizer industry shall lead to the
development of agriculture which will further lead to rise in per capital income of the people
due to increased yield and high quality. The efficiency of this industry would help the country
to earn more of foreign exchange by exporting more and high quality of grains and other
agricultural products.
Fertilizer industry in our country has expanded significance to fulfill Nations hopes and
aspirations for self-efficiency in food grains by trotting path of planned industrialization.
Govt. of India has directed conscious efforts since the early 50s to the present level that
today Indian fertilizer industry meets countrys major requirements of plant nutrients and
contributes remarkably in increasing agriculture yields manifold. The fertilizer industry has
played a key role in rushing an era of plenty of food grains by translating into realty Green
Revolution in the country from an utterly unsatisfactory situation prevailing on the food
grains font India continues to be the third largest producer and consumer of in the world.
Urea production in the country for the year 2002-2003 was 105.54 lakh tones of Nitrogen.

History of NFL
National Fertilizers Limited (N.F.L) was registered on23.08.1974 with an authorized
capital of 500 crores. NFL set up two fertilizer plant in Bathinda (Punjab) and Panipat
(Haryana). NFL has emerged as an industrial giant in the fertilizer sector. Over the years
company has expanded into a multi-unit company with four manufacturing units with varied
technology. Three of these units are strategically located in the high consumption areas of
Punjab & Haryana. The company has an installed capacity of 35.49 lack MT of Nitrogenous
fertilizers.
The plants at Nangal, Bathinda and Panipat are based on partial oxidation of fuel oil/high
petroleum stock, where as Vijaipur unit is based on natural gas as feedstock/ raw material. All
the plants are running at more than rated capacities. The company is indulged in
manufacturing chemicals & bio-products as well as to provide the allied services. NFL
schedule-A & Mini Ratna category-1 Company, is a market leader in the fertilizer industry in
India with 16.9% share in Urea production during 2003-2004.The company has an installed
capacity of 35.49 lakhs MT nitrogenous fertilizers and has recorded an annual sales turnover
of Rs. 3,395 crores during 2003-04.
Registered office:Scope Complex, core-111, 7 instiutional area, Lodhi road,
New Delhi- 110003
Corporate office
A-11, sector 24, District Gautam Budh Nager,
Noida (U.P) 201301

BOARD LEVEL
1

Ms. Neeru Abrol

Chairman and Managing Director

Capt. Pawan Kumar Kaul

Director (Marketing)

Shri M. Sagar Mathews

Director (Technical)

UNITS HEADS

Shri K.K. Chaturvedi (Chief General Manager)

Shri. D.S. Ahuja (General Manager (I/c))

Shri. S.K. Jindal (Chief General Manager)

Shri A. K. Lahiri (General Manager (I/c))

Nangal Unit
Bathinda Unit
Panipat Unit
Vijaipur Unit-I & II

LOCATION OF NFL PLANTS

NFL OPERATING PLANTS AREA

PLANTS AT A GLANCE
The company has its units in various places like Nangal, Panipat Bathinda & Vijaipur. The
Government of India has approved the Impliment ation of Vijaipur Expansion project with an
outlay of 987 Crores. Two of the Units are strategically located in the high consumption areas
of Punjab
Companys strength lies in its sizeable presence, professional marketing and strong
distribution network nationwide.

National Fertilizers Limited,

Vijaipur, Distt. Guna,
Madhya Pradesh-473111.
Email: cc@nfl.co.in
Fax : 07544 - 273089, 273109
Tel. : 91- 7544 - 273101, 273090
Vijaipur Plant

Panipat Plant

10

National Fertilizers Limited,

Gohana Road,
Panipat,
Haryana-132106.
Email: nflpanipat@nfl.co.in
Fax : 0180- 2652515
Tel. : 0180- 2652481 to 485, &
0180- 2655570

National Fertilizers Limited,

Sibian Road,
Bathinda,
Punjab-151003.
Email: nfladm@nfl.co.in
Fax : 0164- 2270463; 0164- 2271270
Tel. : 0164- 2270220/2271200
Bathinda Plant

Nangal Expansion Plant

11

National Fertilizers Limited,

Naya Nangal,
Distt. Ropar,
Punjab-140126.
Email: nangal@nfl.co.in
Fax : 0187-220541
Tel. : 0187-220543

KISAN UREA

Kisan Urea & Kisan khad NFLs popular brands are sold over a large marketing territory
spanning the length and breadth of the country. Kisan Urea is an essential commodity under
the Essential Commodities Act, 1955. The Department of Fertilizer plans and monitors
production, import and distribution of fertilizer and management of subsidy for indigenous
and imported fertilizers in the country. Kisan Khad is produced at the Nangal Unit in Punjab,
NFLs.

NEEM-COATED UREA

The Company has developed Neem coated Urea which on demonstration has improved the
crop yield by 4-5%. N.F.L. has made strides in developing a process for manufacture of
Neem-Coated Urea on commercial scale. The company is focusing its thrust to widen the
marketing operations of Neem coated Urea.
NFL has made efforts to harness unique properties of Neem is regulating release of Nitrogen
to crops when mixed into soil and making available to farmers a more efficient Nitrogenous
12

fertilizers in the form of its Neem-coated Urea primarily based upon research work conducted
by scientists of Indian Agriculture Research Institute, New Delhi.
After carrying out extensive laboratory as well as field studies, NFL has found out that
Neem-Coated urea produced with a thin film of Neem oil-water emulsion of specified
concentration has resulted in enhanced shelf life. Reducing caking of material during storage
and increased nitrogen availability to corps at the time of their growth and hence significantly
contributing towards better crops yield. It has further been reported that the process
developed by NFL in producing Neem-Coated Urea involves marginally higher cost.
Process of coating urea with Neem
The process is based on the use of neem in form of neem oil water emulsion, which is
prepared in suit and used as such for spraying over urea prills. Neem oil used in the
preparation of emulsion is in very small quantity. The coating of neem oil on the urea prills is
in the ratio of 500 ppm (0.5 Kg. Neem oil per 1000 Kgs. of urea prills i.e. 0.05%). The urea
produced by this process has better shelf life in respect of tendency to cake during storage.
Thin layer of neem oil formed on the urea prills imparts slow dissolution in water properly.
This makes neem-coated urea to release nitrogen to the plants slowly and over longer period
In order to test the efficiency of Neem-coated urea so developed, under the field conditions.
NFL has laid 50 fields demonstrations on paddy crop kharif 2002 season, covering
extensive area spreading up to Panipat, Rothak and Karnal in the state of Haryana, Meerut
and Muzaffarnagar in U.P. and Bathinda in Punjab. At Merrut / Muzaffarnagar, Panipat and
Bathinda demonstration were laid under the expert guidance and supervision of extension
wing / KSKs of respective Agriculture Universities. The results obtained under the general
parameters, including increase in yield, insect pest control and general crops stand have been
very encouraging with an average saving to the farmers to the extent of around Rs. 700/- per
Acre by way of increased yields and reduction in expenses towards use of insecticides in
paddy crop.
3

INDUSTRIAL PRODUCTS

Industrial products are certain by products, which are produced during manufacturing of
fertilizers. NFL manufactures and markets the following industrial products:
Sr. No.
1

Product Chamical formula Used for/industry

Methanol(CH3OH)
Formaldehyde

13

Automotive antifreeze

Chemical Synthesis

Aviation Fuel

Rocket Fuel

Nitric Acid Dilute

Dehydrator for natural Gas

Organic Synthesis

(HNO3)

Photo engraving

Medicine

Preparation of Nitro

Ammonium Nitrate

Refining of Silver
Explosive, Pyrotechnics

(NH4NO3)

Nitrous Oxide

Absorbent for Nitrogen Oxides

Ingredient for freezing mixture

Oxidiser in solid rocket properties

Nutrient for Antibiotics

Catalyst
Sulphuric Acid

Sugar Industry

Industrial Grade Urea

Rubber & Tyre Industry

Animal Feed

(NH2CONH2)

Synthetic resins

Textile Finishes

Melamine resins

Paints and Dyes

Drugs and Pharmaceuticals

Steel Manufacturing

Copper Manufacturing

Welding and Cutting

Medical purposes
Animal Husbandry for Semen

Sulphur (S)

Liquid Oxygen (O2)

Liquid Nitrogen (N2)

preservation

14

Electronic Industry

Carbon Slurry(C)

Rubber Industry

Carbon dioxide Gas

Ink making industry

Aerated Water

Anhydrous Ammonia

Dry Ice
Nitric Acid production

(NH3)

Urea production

Nitriding of Steel

Refrigerant Solvent

Yeast Nutrient

Rocket Fuel

Reducing Agent for Ores

Organic Synthesis

Rubber additives

Chemical reagent

Pharmaceuticals

Photographic reagent

Pickling meat

Dyeing and printing of fabrics

Rust proofing and medicines etc.

Oxidizing agent

Oxidizer in solid rocket propellants

Fertilizers

Glass Manfacturing

Chemical reagent

Dynamits/Matches

Military Explosives

Referigerant/Medicines
Arc Welding

Plasma cutting

Lamp industries

Aircraft and Missile industry

(CO2)
10

11

12

13

15

Sodium Nitrite (NaNO2)

Sodium Nitrate (NaNO3)

Liquid Argon (Ar)

14
15

Liquid CO2

Copper refining

Metal refining
Aerated Water

Dry Ice

Off Grade Methanol

(CH3OH)

BIO FERTILIZERS

NFL also manufactures and markets three types of bio-fertilizers, Rhizobium, Solublesing
bacteria (PSB) and Azecpobacpor. Starting with a mere 23 MT production in 1995-96, the
production has risen to 173 MTs in 2002-03. The company presently markets its biofertilizers in Madhya Pradesh, Maharashtra, Orissa, Rajasthan and Punjab.

MAJOR CUSTOMERS OF NFL

COMPANY NAME
1. Ammonia Supply Co.
2. Bhushan Ltd.
3. Gabrid India Ltd.
4. Auro Saler Co.
5. Goyal Gases Pvt.Ltd.
6. Shri Ganesh Chamical
16

PLACE
Delhi
Chandigarh
Parwanoo
Raigarh
Naya Nangal
Jodhpur

PRODUCT
Ammonia
Ammonia
Ammonia
Lumps
Liquid Nitrogen
Nitric Acid

7. Up Chamical Co.
8. India Explosive Ltd.
9. Power Drugs Ltd.
10. Transport India Pvt. Ltd.
11. Metro Chemical Ltd.

Ludhiana
Baroda
Dera Bassi
Delhi
Delhi

Nitric Acid
Lumps
Ammonia
Sodium
Sodium

NFL a Govt. of India undertaking is regarded in the manufacturing & marketing of fertilizer
& various industrial products in the country.
The complete farmer satisfaction through best services is the drawing force NFLs marketing
strategy. The company has expanded its Programme from improving then crop productivity at

17

farm level to the over all development of the farming community. To provide to the farmers
high quality products in the right time, NFL has an extensive and integrated network.

18

Company recognizes employees as its most valuable assets. The high level of performance of
the company lies on the contribution and dedication of the employees. Harmonious and
cordial relations with the employees were maintained throughout the year under review. In
the changed scenario of high technology, the company has been continuously following the
rightsizing and putting the available manpower to the best advantage of the organization.
NFL over the years has developed a team of dedicated professionals in the areas of
production, maintenance and project management, safety and environment control. These
professionals are sought after in the industry both in India and abroad for their specialized
services.
Unit Name
Nangal
Bathinda
Panipat
Vijaipur
CMO
CO
Total
19

Total Employees
1382
749
749
794
421
159
4254

Executives
338
295
326
390
296
134
1779

Non-Executives
1044
454
423
404
125
25
2475

ISO CERTIFICATIONS
NFL is known in the industry for its work culture, value added human resources, safety,
environment, concern for ecology and its commitment to social upliftment. All NFL plants
have been certified for ISO-9002 for conforming to international quality standards and
international environmental standard i.e. ISO-14001. With the certification of Corporate
Office/Marketing operations under ISO-9001:2000, NFL has become the first Fertilizer
Company in the country to have its total business covered under ISO-9001 Certification. All
manufacturing Units of the Company continue to be ISO 9001-2008, ISO 14001-2004 and
OHSAS18001 certified, which indicates Companys commitment to Quality Management
System, Environment Management System and Occupational Health and Safety Systems.
INFORMATION TECHNOLOGY
Company in its continued endeavor towards achieving on-line sharing of information for
effective decision-making and paperless environment, implemented local area network(LAN)
during 2002-03 at all its units and zonal offices. The company has also initiated for on-line
Material Management System at all units and Cooperate Office.

ORGANISATION STRUCTURE
Organization is the backbone of the management. Without efficient organization, no
management can perform its function smoothly. Sound organistion contributed greatly to the
continuity and success of an enterprise. It is the framework of relationships of persons
operating at various levels with vertical or horizontal dimensions. Type or organistion in a
company depends on its size, technology and the range of production.
Being a manufacturing organization N.F.L. is an organized on functional level and its
organizational setup is very well designed. There is a clearly defined line of authority. The
responsibility of higher level, for the acts of its subordinates is absolute. The structure is
simple and flexible. There is a unity of production. The employers and employees work in
harmony and cooperation without creating any confusion and conflicts.

CORPORATE OBJECTIVES
NFL is instrument of society. It has to service the needs of people within the scope of its basic
objectives. To achieve this NFL must:
20

Select capable people and improve their knowledge and skills on organized basis.

Motivate and enthuse the employees to achieve higher productivity with team spirit.

Lay down integrated objectives, define individual goals and maintain an atmosphere
conducive to achievement of these goals.

The corporate objectives of NFL are:

BASIC CORPORATE OBJECTIVES
In terms of Memorandum of Association, NFL was setup to manufacture and market
chemical fertilizers, other chemicals and by-products as well as to provide the allied services.
In order to achieve and maintain a leading position in the production and marketing of
fertilizers, the following Micro Objectives have been identified:
MICRO OBJECTIVES
1

Productivity

To achieve the best possible levels of production and economy in the use of inputs while
insuring safety and proper maintenance of plant and machinery and pollution control. More
specifically
a

To strive to raise capacity utilization

To improve upon consumption norms consistently

Research and Development

To carry out R&D activities for:

a

Increasing plant ability

Saving use of energy in different forms,

Better recovery of saleable by-products,

Process improvement/development, and

Increasing efficiency utilization on a sustained basis in the application of chemical

fertilizers in combination with other agricultural input.

Profitability

To manage the assets, men and material in most effective and efficient manner ensuring :-

21

Reasonable return on investment commensurate with the principles laid down by the
government from time to time, and

Generation of increasing internal resources.

Marketing & Consumer Service

To provide the farmers high quality products in right time and in adequate quantities
and with a package of modern agricultural practices, at the same time, maintaining
reputation for fair business practices.

To further intensify promotional efforts for increased use of fertilizers and to

maximize distribution of Companys products within the areas covered by the
company, consistent with Government Policy.

Organization

To develop and maintain an organizational environment for encouraging individual and group
initiative, innovation and productivity and also sustain fair deal and humane approach.
6 Growth
a

To achieve reasonable and consistent growth in the business of manufacture and

marketing of fertilizers and chemicals compatible with needs of the market.

To work out diversification/expansion schemes to increase profitability of the

Company and meet the changing needs costumers.

7 Obligation to society
To promote development of ancillary industries.

22

SALIENT FEATURES OF COMPANY

The Company has an excellent track and high profits, with highly motivated and
dedicated workers and officers-no industrial relation problem.
N.F.L. was given the Mini Ratna Category-1 by the government of India in 1998
based on the companies over all performance during the preceding years.
The company was ranked 27th in the terms of sales according to Business India Super100 in 1998.
International Greenland Society, Hyderabad awarded NFL Best Environment &
Ecologist Implementation Award for the year 1995-96.
Recently NFL has been A in Public Sector Undertaking because of its constant good
performance.
NFL is the first company in Pubic Sector having the certification of ISO-9002, ISO9001 and ISO-14001.
The Company has signed a memorandum of understanding with the Union Government
for 32.25-Lakh tone production in 2001-02.
NFL has signed memorandum of association for 2004-05 with the Department of
Fertilizers.
National Fertilizer Limited, Ranbaxy Laboratories Limited and Indo Rama Synthetics
Limited have secured the National Safety Awards for the year 2001-02.

23

STRENGTHS

24

High capacity to produce.

Percentage of profit in Industrial products is very high.

The company with an excellent track record of high profits.

The NFL plants are located in virgin market for some of the industrial products.

An easy starter more than 25 years experience in the states of Punjab, Haryana and
Madhya Pardesh.

Lower capital cost plant at Bathinda, Panipat and Nangal. Fully depreciated Vijaipur
plant with an investment of Rs. 533 crores and Vijaipur expansion plant with an
investment of Rs. 1071 crores against the present glass root plant cost of about Rs. 1500
crores.

WEAKNESSES

Large equity base.

Old and energy intensive fuel oil based at plant at Nangal, Panipat and Bathinda
requiring high maintenance.

High cost production in fuel oil based plants.

High investment for revamp/replacement and changeover of feedstock from fuel

oil/LSHS to LNG.

Single nutrient product base.

Socio-political compulsions.

Highly centralized system.

Lack of sufficient promotional & publicity activities.

Requirement is seasonal.

OPPORTUNITIES

Growth in fertilizer consumption in the eastern markets of the country.

Marketing of Neem Coated Urea on large scale.

Marketing of agricultural inputs/services under one roof.

Marketing of other fertilizers like DAP, MOP, SSP to harness existing imbalance in
nutrient base and to move towards NPK ratio of 4:2:1.

Marketing of seeds and pesticides.

Marketing of specialized services and association in joint ventures in India/abroad.

25

Growth in the production and consumption of bio-fertilizers.

THREATS

Declining in the consumption of nitrogenous fertilizers in predominant market areas.

Energy intensive i.e. Fuel Oil based plants could face closure due to new policy on
fertilizers unless technology modifications are implemented.

Dismantling of distribution system.

Availability of cheaper improved fertilizers.

Increasing prices of inputs i.e. Fuel Oil/LSHS/Naphtha/Gas in India.

Requirement of large investments for modernization of Fuel Oil/LSHS based plants.

26

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27

SALLIENT FEATURE OF NFL, NANGAL UNIT

Nangal Unit awarded ISO-9001: 2000 certification Nangal Unit awarded ISO-9001:
2000 certification.
Nangal Unit has been accredited with ISO-9001: 2000 the latest version of quality
certification by M/S. KPMG. NFL, Nangal Unit is the first fertilizer plant in the
country to be awarded ISO-901: 2000 certification.
Installed Capacity:

478500 MTPA

Capital Investment:

229.19 Crores

Commencement of Production: November 1, 1978

PROCESS
Ammonia:

KBR SMR (Steam Methane Reforming) with Purifier Technology

Urea:

Technimont Total Recycle Process

Raw material: Coal, LNG/ RLNG, Power, Water

PLANTS AT NANGAL UNIT

There are two types of plants in the Nangal Unit:-

Unit Plants

Expansion Plants

Unit Plants
I Water Treatment Plant
II NMP (Nangal Modernization Plant)
III Ammonia I
IV Nitric Acid Plant
V CAN Plant
VI Bagging Plant

b Expansion Plant
Gradual reduction in the power supply to the fertilizer plant badly effects the production, as
also augment the fertilizer production. The Govt. of India decided to establish new fertilizer
plant, which came to be known as Nangal expansion project with an additional Nitrogen
capacity of 152000 tonnes by using fuel oil as a feed stock. This plant not only increased
28

production capacity from 232000 tonnes of nitrogen per annum, but also reduced the
dependence on bulk supply of electric power.
I. Steam Generation Plant
2. Ammonia-11
Urea Group of Plants
I

Urea Plant

II

BEW Plant

III

HWP

IV

Hydrolyser Plant

Ammonia Storage

VI
VII

Chromate and HCN Treatment Plant

Cooling Towers

POLLUTION CONTROL
NFL has a long tradition of nurturing the environment in and around its manufacturing units.
At NFL, we believe in sustainable development without degrading the environment and are
fully committed to our responsibility to the Society. In line with our commitment to this
object, we have installed with state of art effluent treatment facilities at all our Units. At NFL
Vijaipur the company has adopted cleaner technology to minimized generation of pollutants.
All the pollutants generated in the manufacturing process are treated at source and pollution
control schemes have been incorporated at the inception stage itself.
On environment and pollution control, NFL has been taking adequate measure so as to
control the emission level within the standards prescribed by the State Govt. and Minimal
National Standards (MINAS). Right from the beginning special care has been taken by the
Nangal Unit in this connection. The Unit has the following Affluent Treatments Plants, the
expenses of which are directly allocated to the cost center.
i

HCN Chromate Treatment Plant

ii

NOX Abatement Plant

iii Urea Hydrolyser Plant

iv Electrostatic Precipitator Plant
v

Affluent Plants

vi Sulphur Recovery Plant

29

EVER BEST PRODUCTION RECORDS

Production
Period

Ammonia Plant

Urea Plant

Daily

1,045 (27.01.2000)

1,654 (08.11.2001

Monthly

30,117 (Dec. 1998)

49,171 (Oct., 2002)

Yearly

3,00,840 (2003-04)

4,78,500 (2002-03)

EVER BEST DISPATCH RECORDS

Production

30

Period

Ammonia Plant

Urea Plant

Daily

3,440.400 (13.11.1997)

2,364.700 (31.01.1984)

Monthly

51,868.350 (June 2002)

38364.250 (Sep 1975)

Yearly

4,78,514 (2001-02)

3,33,147.055 (1976-77)

31

Working capital is simply current asset minus current liabilities and the amount can be
positive or negative. Working capital is basically an expression of how much in liquid assets
the company currently has to build its business, fund its growth and product value for the
owner. The faster a business expand, the more cash it will need for working capital and
investment the cheapest and best sources of cash exist as working capital right within the
business . Good management of working capital is very important because the term is used
for the capital needed for day-to-day operations.
According to gerstenberg working capital means current assets of a company that are changed
in ordinary course of business from one to another. e.g. cash to inventory to receivable to
cash.

NN

DD

C
P

A
L

ON THE BASIS OF CONCEPT

1

GROSS WORKING CAPITAL

Gross working capital is the total of all the current assets of a business.
2

NET WORKING CAPITAL

Net working capital means the excess of current assets over current liabilities.
NET WORKING CAPITAL = CURRENT ASSETS CURRENT LIABILITIES.

32

CONSTITUENT OF CURRENT ASSETS AND CURRENT LIABILITIES

CURRENT ASSETS
This is any cash that can be quickly turned into cash. This includes:
Cash in hand and bank balance
a

Prepaid expenses

b Accounts receivable
c

Sundry debtors most securities

d Inventory
e

Accrued incomes

CURRENT LIABILITIES
This is a liability in the immediate future. This includes
a

Sundry creditors

b Accounts payable
c

Outstanding expenses

d Short term loan, advances and deposits

e

Bank overdraft

Provision for taxation

ON THE BASIS OF TIME

3

PERMANENT WORKING CAPITAL

To carry on day-to-day cooperation of the business without any obstacles, a certain minimum
level of raw material work in progress, finished goods and cash must be maintained in a
continuous basis. The amount needed to maintain current asserts in this minimum level is
called permanent working capital.
4

TEMPORARY WORKING CAPITAL

Valuable working capital on the other hand represents the amount needed over and above the
permanent working capital to take care of seasonal shifts in sales or activity levels.

33

FACTORS DETERMINING THE WORKING CAPITAL

A firm should have neither too much nor too little working capital. The working capital
requirement is determined by a large no. of factors but, in general, the following factors
influence the working capital needs of an enterprise: 1. Nature of Business
Public utility undertaking like electricity; water supply etc. requires less working capital than
the trading concerns and financial firms, which further require less working capital than the
manufacturing concerns.
2. Size of Business
Large the size of business enterprise grows, greater would be the need for working capital.
The size of business may be measured in the terms of scale of its business operations.
3. Production Policy
Production cycle means the time-span between the purchase of raw materials and its
conversion in to finished goods. The longer the production cycle, the longer will be the need
of working capital because the funds will be tied up for a longer period in work in process. If
the production cycle is small, the need for working capital will also be small.
4. Operating Cycle
In a manufacturing concern, the operating cycle starts with the purchase of raw material and
ends with the realization of cash from the sale of finished products. The larger the cycle the
larger is the operating cycle.

34

1 Credit Policy
The credit policy of a concern in its dealing with debtors and creditors influence considerably
the working capital requirement. Average debt collection period of NFL is 30 days so it
require sizeable amount of working capital.
2 Price Level Changes
Changes in price level also affects the working capital requirements. If the price level is
rising, more funds will be required to maintain the existing level of production.
3 Miscellaneous Factors
Operating efficiency.
Management ability.
Irregularity of supply.
Import Policy.
Assets structure.
Banking facilities
Working capital includes the following
1

Cash Management

Receivable Management

Inventory Management

WORKING CAPITAL CYCLE

CASH flows in a cycle into, around and out of a business. It is the business lifeblood and
every managers primary task is to help it flowing and to use the cash flow to generate
profits. If a business is operating profitably, then it should, in theory, generate cash surpluses.
If it does not generate surplus, the business eventually run out of cash
The faster a business expands the more cash it will need for working capital and investment.
The cheapest and best sources of cash exist as working capital right with in business. Good
management of working capital will help to improve profits and reduce risks. Bear in mind
that the cost of providing credit to customers and holding stocks can represent a substantial
proportion of firms total profits.
35

There are two elements in the business cycle that absorb cash inventory (stocks and work in
progress) and receivable (debtor owing your money). The main sources of cash are payables
(your creditors) and equity and loans.
Each component of working capital (namely inventory, receivable, and payables) has two
dimensions TIME and MONEY. When it comes to working capital- TIME IS MONEY. If you
can get money to move faster around the cycle (e.g. reduce inventory level relative to sales),
the business will generates more cash or it will need to borrow less money to fund working
capital. As a consequence you could reduce the cost of bank interest or youll have additional
free money available to support additional sales growth or investment. Similarly, if you can
negotiate improved terms with suppliers e.g. get longer credit or an increased credit limit; you
efficiently create free finance to help fund for future sales.
HOW MUCH WORKING CAPITAL DO YOU NEED?
The key to judging the right amount of working capital required in your business is
understanding your cash or operating cycle. This is the time it takes from when cash is
converted into goods and services, to when you receive payment for them. This delay creates
the need for working capital. Each operating cycle generates a flow of income including a
margin of profit. Which should be sufficient to cover running expenses and your drawings? If
you can get money to move faster around the cycle, the business will generate more cash or it
will need to borrow less money to fund working capital. As a result you could reduce the cost
of bank interest or you will have additional free money available support extra sales growth
or investment.

CURRENT ASSETS
PARTICULARS
Inventories
Trades Receivable
Cash & Bank
Loans & Advances
Total (A)

2011-12
1427302764
5676075221
290979
148828416
7252497380

2012-13
506477560
8219603583
886389
65815083
8792782615

2013-14
812117440
7473364823
216355
67904458
8353603076

CURRENT LIABILITIES
PARTICULARS
36

2011-12

2012-13

2013-14

Trades Payable
Provisions
Total (B)

1397943280
57809226
1455752506

477279085
112696860
589975945

452220686
130605768
582826454

NET WORKING CAPITAL

Net Working

5796744874

8202806670

7770776622

Capital (A-B)

WORKING CAPITAL CYCLE AT NFL

1

Holding period of raw material

=12days

Holding period of work-in-progress

=3days

Holding period of finished goods

=18days

Average collection period

=170days

Average payment period

= 33days

Working capital cycle at NFL

(1+2+3+4-5)

Cash is one of the current assets of a business. It is needed at all times to keep the business
going.A business concern should always keep sufficient cash meeting its obligations. Any
shortage of cash will hamper the operations of a concern and any excess of it will be
37

unproductive. Cash is most unproductive of all the assets. While fixed assets like machinery,
plant, etc. and current assets such as inventory will help the business in increasing its earning
capacity, cash in hand will not add anything to the concern. It is in this context that cash
management assumed much importance.
MOTIVES FOR HOLDING CASH
Transaction Motive
A firm needs cash for making transactions in the day-to-day operations. The cash is needed to
make purchases, pay expenses, taxes, dividend, etc. the cash needs arise due to fact there is
no complete synchronization between cash receipt and payment.
Precautionary Motive
A firm is required to keep cash for meeting various contingencies. Though cash inflow and
cash outflow are anticipated but there may be variations in these estimates.
Speculative Motive
The speculative motive relates to holding of cash for investing in profitable opportunities as
and when they arise. Such opportunity do not come regular manner. These opportunities
cannot be scientifically predicted but only conjectures can be made about their occurrence.
SOURCES OF CASH
Sources of additional working capital include the following:

Existing cash reserves

Profits (when you secure as cash!)

Payables (credit from suppliers)

New equity or loan from shareholders

Band overdrafts or lines of credit

Long- term loans

If you have insufficient working capital and try to increase sales, you easily over-stretch the
financial resources of the business. Exceptional cash generating activities e.g. offering

High discounts for early cash payment

Bank overdrafts exceeds authorized limit

38

Seeking greater overdrafts or lines of credit

Part paying suppliers or others creditors

Paying bills in cash to secure additional supplies

Management pre-occupation with surviving rather than managing

Frequent short-term emergency requests to the bank (to help pay wages, pending
receipts of a cheque)

Cash management has been assumed importance it is most significant of all the current
assets. It is required to meet business obligations and it is unproductive when not used. Cash
management deals with following:
1

Cash in-flows and cash out-flows

Cash flow within the firms.

Cash balances held by the firm at a point of time.

MANAGING CASH IN-FLOWS

1

Prompt payment by customers.

Quick conversion of payment into cash.

Decentralised collections.

METHODS OF SLOWING CASH OUT-FLOWS

1

Paying on last date.

Payment through drafts.

Adjusting payroll funds.

Centralization of payments.

Inter-bank transfer.

CASH MANAGEMENT IN NFL

Cash management in NFL includes following:
A CASH INFLOW AND OUTFLOW
CASH INFLOWS
39

Receives from corporate office Noida in sale of products.

Sales in canteen

Rent

Income from hospital

OUT FLOWS
1 Petty expenses
2 Payments of salaries
B CASH BALANCE HELD BY THE FIRM
In NFL Nangal unit is a maximum limit of Rs. 150000 on daily basis. The unit can withdraw
maximum rs.200000from the bank.
C CASH PLANNING IN NFL
As such there is not any provision of preparation of projected cash flow statements either on
daily or monthly basis.
D CONVERSION OF PAYMENT IN CASH
In NFL collection are accepted through demand draft, favoring national fertilizers limited
Naya Nangal, distt ropar (pb)
E INTER BANK TRANSFER
NFL having accounts with various banks and branches of these banks in various cities so the
amount can be transferred easily to the bank where disbursement is made. It helps in avoiding
excess money in the bank. The banks are state bank of India, Punjab national bank, bank of
India, state bank of Hyderabad, union bank of India.
F PAYMENT OF SALARIES
In NFL all the workers in the factory are paid wages in cheque.

Receivables results from credit sales, a concern is required to all sales in order to expand its
sales column. Receivables represent amount owed to the firm as a result of sales of goods or
40

in ordinary course of business. The period of credit and extent of receivable depends upon the
credit policy followed by the firm. The purpose of maintaining is investing in receivables is
to meet the competition and to increase the sales and profit.
Receivable management is the process of making decisions relating to investment in trade
debtors. The objective if receivables management is to make sound decision as regard to
investment in debtors and to promote sales and profit until that point is reached where the
return on investment in further funding of receivables is less than the cost of fund raised to
finance that additional credit but it includes the risk of bad debts.
KEY DECISION AREAS IN MANAGEMENT
IF RECEIVABLES
CREDIT POLICY
The first decision area is the determination if the credit policy it has two broader dimensions:
1

Credit standards

Credit analysis

Credit standard

It represents the basic criteria for the expansion of credit of customers. The quantities bases
of establishing credit standards are factors such as credit ratings, credit references, average
payments period &certain financial ratios.
CREDIT ANALYSIS
The second aspects of credit policy are credit analysis or investing. It is one of the basis
of credit analysis that the decisions to grant credit to a customer as well the quantum of
credits would be taken. This Aims at:
OBTAINING CREDIT INFORMATION
Credit information is taken from both internal and external sources. Trade references
&records of the firms contemplating an extension of credit are important sources of internal
information. Whereas, external sources like financial statements &bank references &
specialist credit bureau reports help in establishing the credit worthiness of the customers.
ANALYSIS OF INFORMATIONS
Once the credit information has been has been collected from different sources, it should
analyze to determine the credit worthiness of the applicant. Although there are no established

41

procedures to analyze the information, the firm should devise which suit its needs. The
analysis should cover two aspects qualitative and qualitative
CREDIT PERIOD
It means the period allowed to customers for making the payments. Hitachi disposes off
whole quantity of wheat & paddy to FCI which is required to make payment within 72 hours.
In case of fertilizers those are sold on cash basis, no credit period is provided to them.
CREDIT TERMS
This is second area in the receivables management & is associated to the stipulation under
which goods are sold on credit. Credit terms are composed of two components.
Credit period: In terms of duration of time for which credit is extended
Cash discount: if any, this can give advantage to the customers.
COLLECTION POLICY
This refers to the procedure followed to collects the accounts outstanding after the expiry of
the credit period. These periods may include:
a

Monitoring the state of receivables

b Dispatch of reminders to customers

c

Telegraphic & telephonic advice to customers, when payment becomes due

d Legal action to recover overdue accounts

Basically, it is concerned with the credit period allowed to the customers. Delay may be
caused due to inefficient management or may be due to bad credit worthiness of the customer.
In order to avoid it, it is required to motivate or give various incentives to encourage them to
make payments.
HANDLING RECEIVABLES (DEBTORS)
Cash flow can be significantly enhanced if the amounts owing to a business are collected
faster. Every business needs to knowwho owes their money how much is owed. How long
it is owing for what it is owned!!!
Slow payment has a crippling effect on business in particular on small business that can least
afford it. If you dont manage debtors, the will begin to manage their business as you will

42

gradually lose control due reduced cash flows and, of course, you could experience an
increased incidence of bad debt. The following measures will help manage your debtors:
1

Have the right mental attitude to the control of credit and make sure that it gets the
priority if deserves

Establish clear practices as a matter of company policy.

Make sure that these practices are clearly understood by staff, suppliers and customers.

Be professional when accepting new accounts, and especially large ones.

Check out each customer thoroughly before you offer credit. Use credit agencies, bank
references, industry sources etc.

Establish credit limits for each customer and stick to them.

Continuously review these limits when you suspect fought times are coming or if
operating in a volatile sector.

Be very close to your large customers.

Invoice promptly and clearly.

10 Consider charging penalties on over dues accounts.

11 Consider accepting credit /debit cards as a payment option.

RECEIVABLE MANAGEMENT IN NFL, NANGAL UNIT

THE PRODUCTS IF NFL, UNIT ARE FERTILIQERS, INDUSTARIAL PRODUCTS
AND , then they send to production department of specific unit & then sales section prepares
the invoice for the sold products along with the sales tax, excise, freight etc. then the products
delivered from the plant. At that time three copies are made. The buyer keeps first copy &
second copy. The third copy is kept by the sales the sales department. The sales department
checks the rates of sales tax, excise etc. before sending the information to marketing
department & finally the details of the data are send to Delhi.
The second copy is very important as it ensures the convent finance department at Delhi fixes
the prices of the products for future on the basis of the record of the marketing department &
the checked consultations by the sales action.
INDUSTRIAL PRODUCTS: Industrial products are sold throughout the country the
marketing department is responsible for the sales of the products of the company & the
accounting of sales is done at the sales section. The company at present is selling two main
industrial products i.e. sodium nitrite & sodium nitrate other intermediate products like
methanol, urea are also sold.
43

UREA: Urea can be sold only surrounding areas i.e. Jammu and Kashmir, Haryana Punjab &
Rajasthan. The same procedure is followed for urea but no sales tax or excise is imposed on
urea & the prices are determined by ministry of fertilizers at Delhi and the prices of urea are
same everywhere. The unit at Nangal is concerned with the production of urea. To cover the
difference between cost price & market price, Ministry of fertilizers provides subsidy, they
provide 283 per ton as subsidy on urea.
INCENTIVES
Two types of rebates are given in prices i.e. distance rebate & quantity rebate to attract the
consumers at distant places.
PENALITY
No penalty for delayed payments is imposed.

44

Inventory management is a topic of considerable and wide interest. Inventory control keeps
track of inventories. Through it may not be treated as an exclusive function in an enterprise.
The decision regarding appropriate size of inventory is of paramount significance. It should
base on some sound principles and techniques.
INVENTORY
Inventory all the material, parts, supplies, expense tools and in process or finished products
recorded in bulks by an organization and kept in its stocks or plant for some period of time.
Inventory is an essentials part of an organisation. Every business manufacturing organisation
however, big or small has to maintain some inventory.
In financial balance, inventory is defined as the sum of the values of raw materials. Fuels and
lubricants, spare parts, maintenance consumables, semi-processed materials and finished
stocks at any given point of time. The operational definition of the inventory would be the
amount of raw material fuel and lubricants, spare parts and semi-processed materials to be
stocked for smooth running of the plants. Since these resources are ideal when kept in stores,
inventory is called as ideal resource of any kind having an economic value.

CLASSIFICATION OF INVENTORY
Inventory may be classified in four parts:1

Raw material inventory

Production components.

Work in progress.

Finished goods inventory.

RAW MATERIAL INVENTORY

Raw materials are the major inputs into an organisation and from the bulk, which gets convert
into output, as any breaks in the supply if raw material will keep the production lines idle.
There importance can be easily visualized. The function of raw material inventory is to act as
buffer between procurement and manufacturing. The size of inventory is dependent on the
factors such as internal lead time for purchases; supplier lead time; vendors relations;
availability of the material; the consumption of the materials.
2
45

PRODUCTION INVENTORY

Similar to raw materials, production components are purchased from outside. Production
components are two types:
1

Those purchased from the market like spare parts.

Special parts or components manufactured in own company and kept in store fir use.

WORK IN PROGRESS INVENTORY

These are the semi finished products usually found in the factory floor in various wastage of
production. Work in progress inventory might exist merely because of production cycle time
the raw material has to go through a combination of different operations, Before they take
shape as saleable product the rate of production at reach work section will depend upon the
technology, while the production executives tries his best to balance the line, a perfect
balance is almost impossible. In addition; to this breaks low in certain work Centre can starve
other down the line. To overcome these difficulties work in progress inventory stored at work
Centre.
4

FINISHED GOODS INVENTORY

The finished goods inventory is maintained to ensure a free flowing supply to the customer
and for this marketing department insists on sub stained finished good inventory. The size
also depends on the ability of the marketing department to push the product, the companys
ability to stick to the delivery needle, the shelf life and the warehousing capacity.
Two factors which influence the inventory of all types are the accuracy and detail of the final
forecast- all the inventories are geared for future requirement and are there for, sensitive to
this factor the available storage space, the logical sequence toothed factor is the self of the
items stores, a factor for consideration in the case of perishable goods.
INVENTORY MANAGEMENT
Inventory management is the planning, organizing and control activities focused on the flow
of inventory into through, and from the organization many decisions fall under the inventory
management these are:a

When is the best time to purchased material merchandise?

b How purchasing agreement should be structured?

c

Which is the best way to handle materials otter merchandise inventories, once they are
received?

46

These questions are among the many that inventory management seeks to answer. It is the
management of inventories such a way, which minimizes the idle time caused by shortage if
raw material, stores, or spares and keeping down capital investment in inventories.

OBJECTIVES OF INVENTORY MANAGEMENT

Objectives are the desired results. The objectives of inventory management are:1 To ensure continuous and uninterrupted production. Ditto achieved the above objectives in an
effective and economical manner.
2 To effect economies in the cost of materials by purchasing materials of the right quality, in
the right quantity, at right time from right sources and the right price.
3 To affect economies in the cost incurred on materials after they have been purchased, through
storage processing and warehousing toll the finished goods ultimately reach the
customer.
4 To reduce working capital requirement through proper and scientific inventory control.
5 To improve the quality of manufactured goods by use of bearer raw materials of components
and thereby increase the competitiveness of such goods put on sales.
6 To increase the competitiveness if manufactured goods by reducing their price through cost
reduction and value analysis.
7 To ensure cooperation among all the department of the enterprise to meet inventory
management objectives, both at coordination in respect of such activities.

INVENTORY MANAGEMENT SYSTEM IN NFL, NANGAL

The success of any organization depends upon the factor that grow efficiently the resources
are utilized. In this connection the inventory management and control system of any
47

organization have a vital role to play. As far as the NFL is concerned a comprehensive
procedure is laid down in the stored manual of the company, for the purpose of inventory
control and management system is such a way, that resources of the organization are properly
utilized.
INTRODUCTION
The material department in Nangal unit is defined in two departments:
A

Purchase department.

Store department.

PURCHASE DEPARTMENT

The principal objectives of a purchase department are summarized as the procurement of

materials or supplies of the right quality, in the right quantity. At the right time, from the right
suppliers, at the right price.
In NFL purchase department deals with oil, and bags. For these NFL corporate office has
lined up the long term contracts with the concerned suppliers. for jute/HDPE bags purchase
order are being issued by NFL, Corporate Office and necessary delivery of these bags
delivery orders are being issued by Nangal unit, as regard the purchase of import items
procurement action is being taken by Nangal unit, however, the L.C.S ARE being opened by
the corporate office. A part from the purchase, purchase department Nangal unit also
complementary certain complementary activities. These are:
A

Market research for new material and development of new source of supply.

Follow up suppliers to insure proper delivery.

Quality assurance in respect of supplies made by vendors.

Inspections of material for quality with a view to ensure that specification are
compiled with.

Development of proper and streamline system and procedure relating to purchasing

function to ensure that work is carried out efficiently and at lowest reasonable
operating cost.

Coordination with others functions within the department like, transportation,

receiving, store keeping, inventory control, accounting etc.

Coordination with the production, maintenance and finance departments regarding

alteration in production schedule presenting breakdown or requirement of items etc in
right time.

48

STORE DEPARTMENT

In NFL stores department deals with the receipt, inspection, storage and issue of all items
expect some bulks items like jute/HDPE bags Sulphuric acid naphtha oil and coal which are
being handled by directly by user department, in the operations of NFL. They are in direct
touch with the department in its day to day activities: the most important purpose solved by
the stores is providing the uninterrupted service to the manufacturing divisions. Further stores
are often equated directly with money, as money is licked up in the stores. The function of
stores department in Nangal unit may be classified as:
I

To receive the raw materials, components, tools, equipments and others items and
account for them.

II
III

To provides adequate and proper storage and preservation to various items.

To meets the demand of consuming department by proper issue and account of the
consumption.

IV

To minimize obsolesce surplus and scrap through proper codification, preservation and
handling.

To highlight stock accumulation, discrepancies and abnormal consumption and effect

control measure.

VI
VII

To provide supporting information for effective purchase action.

Stores also have to keep liaison with purchase department as well as finance department
with regard to stores accounting. Physical stock verification disposal of scrap and
surplus materials, lodging of normal claims on the underwriters/carriers etc.

CODIFICATION OF STORES
To facilitate computer processing and proper accounting all item of stores shall be allotted 7
digits material code. The seven digits are allocated in the following manner:

49

TYPE

OF Primary 1st&2nd SECONDARY 3RD& 4TH THRITARY

MATERIAL

5TH,6TH&

DIGIT

DIGIT

MAIN

DIGIT
SUB CATEGORY E.G. Detailed

GENRAL

CATEGORY e.g. hands

STORES

tools,

tools,

machines specifications

hardware tools etc.

etc.
Deptt. / plant of Major
PLANT SPARES

7TH

section.

equipment

assembly

e.g.

compressor,

or Exact
pump specification/part
heat s

exchanger etc.
A control register shall be maintained for allotting code number to stores and spares.
Considering the importance of this function a component officer in the materials department
shall allot new codes. It shall be ensured that same item which difference nomenclatures are
allocated the same code, which will help on verity reduction and standardization. Few new
receipts 24-characters nomenclature shall be fed to the computer periodically.

NORMS OF INVENTORY HOLDING

The inventory levels are determined keeping the following norms of inventory holding in
view or as per management policy from time to time.
CATEGORY HOLDINGNORMS IN NO. OF DAYS/MONTHS

50

RAW MATERIALS
LSHS/ F OIL

20 days

LIME STONE

30 days

FUEL
COAL

30 days

PACKING MATERIALS
UREAS BAGS

30 days

CHEMICALS
IMPORTED

9 months

INDEINOUS

2 months

OILS & LUBRICQANTS

INDIGENOUS

3 months

GENERAL STORES
IMPORTED

15 months

INDIGENOUS

6 months

INSURANCE SPARES
IMPORTED & INDIGENOUS

GEN. CONSUMPTION SPARES

51

3% of the cost of plant and machinery.

no norms notified

RATIO ANALYSIS AND INTERPRETATION

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated
quotient of two mathematical expressions and as the relationship between two or more
things. In financial analysis, a ratio is used as an index or yardstick for evaluating the
financial position and performance of a company. The absolute accounting figures reported in
the financial statements do not provide a meaningful understanding of the performance and
financial position of a company. An accounting figure conveys meaning when it is related to
some other relevant information. The ratio helps us to make quantitative judgment. The ratio
analysis converts figures into meaningful comparables forms & removes the difficulty of
drawing inferences tool it enables analysts to draw quantitative answers to questions such as:
Is the net profit adequate?
Are the assets being used efficiently?
Is the company solvent?
Can the company meet its current obligations or so on?
There are four types of ratio
1

Liquidity ratios

Activity ratios

Profitability ratios

Solvency ratios

Following is the analysis and interpretation of balance sheet and income statement of NFL.

52

LIQUIDITY RATIO
The liquidity position of the company is studied through the current ratio, acid test ratio and
absolute quick ratio.
Name

Fromulla

2012-13

2013-14

Current ratio
Curresnt assets/Current liabilities
Liquid ratio
Liquid assets/Current liabilities
Absolute Liquid

4.07:1
3.84:1

5.23:1
4.91:1

Ratio
Absolute Liquid assets/Current liabilities
INTERPRETATION:

0.05:1

1.99:1

The NFL Nangal unit shows relatively lower value of current ratio in the years 2012-13. It
was 4.07:1 respectively. But in the year 2013-14 it comes to 5.23:1 which is very near to ideal
ratio. The liquid ratio is only absolute liquid ratio is low i.e. oil due high trade debtors and
inventory. Taking all liquidity ratios together, we can say that the liquidity. position of the
company is satisfactory.

ACTIVITY RATIOS
These ratios also called turnover ratios. Turnover indicates the speed the capital employed has
been rotated in the business.

Name
Inventory turnover

Formula

ratio
Cost of goods sold/average stock
Inventory Conversion No. of days/Inventory turnover

2012-13
12.73 times

2013-14
9.08 times

29 days

40 days

period
ratio
INTERPRETATION
The inventory turnover ratio has decreased from 12.73 to 9.08 times. The company does not
converted efficient sales in the years. It reveals the company had some problems in
arrangement to control its inventory.
PROFITABILTY RATIOS
Profitability ratios measure the performance of the company.
Name
Administration
53

Formula
Administration

2012-13
0.81%

2013-14
1.81%

expenses ratio
Selling & distribution

expense/sales
Selling & distribution

0.54%

0.78%

expense ratio
Earning per share

expense/sales
PAT / no. of shares

3.28

1.73

INTERPRETATION
Company has undergone significant loss in the FY 2012-13, 2013-14 because of high
depreciation charged by the company. Moreover the company pays comparatively high
salaries to staff overall.

PERFORMANCE AT A GLANCE

54

55

Research methodology is a design to systematically solve the problem.

In research

methodology, we not only talk of research methods but also consider the logic behind the
56

methods. The purpose of the methodology section is to describe the research procedure. It
includes the overall research design, the sampling procedures, the data collection method, the
field methods and analysis procedures.
RESEARCH SITE
National Fertilizers Limited- Nangal Unit.
OBJECTIVES OF THE STUDY
Good better best, never let it rest till your good is better and your better is best.
The objectives of the study are as follows:
a

To study the working capital position of NFL.

b To study their cash, receivable and inventory management.

c

To find out length of there working capital cycle.

d To analyze performance and position of the company.

RESEARCH DESIGN
Exploratory and descriptive research design. The data is analyzed in a tabular form and in
well and easy to understand manner.
DATA COLLECTION
Both Primary and Secondary data has been used in this study.
Primary data
Most of the has been collected through personally interact with senior officers. Colleagues
and staff of finance departments of NFL-Nangal unit.
Secondary source
Secondary data includes financial reports and manuals of the NFLs Nangal Unit and
companys annual reports. It also includes journal and books on the topic under study. To get
information about industry and company, many web sites were also visited.

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LIMITATIONS
Although full efforts have been made in this study, still because of following limitations a
more detailed research is required to reach to the effective conclusion.
1

The element of personal because can not be avoided.

As data taken is secondary, so it cannot be said to give constant conclusions, as its not
revised to present situation.

The time of research was not that much sufficient that could be regarded as opportunity
to analyze WCM of such a large organization.

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59

Fertilizers are chemicals given to plants with the intention of promoting growth. There are
different types of fertilizers like Calcium Ammonium Nitrate, Single Super Phosphate. Urea
Ammonium Phosphate., Ammonium phosphate Sulphate etc.
The development of the fertilizers industry is of great importance to our National economy
as; the primary occupation of 70% of the Countrymen is agriculture. And for a good yield.
Fertilizer Play, an important role. The increase in the Fertilizer Industry shall lead to the
development of agriculture which will further lead to rise in per capita income of the people
due to increased yield and high quality. The efficiency of this industry would help the
country to earn more of foreign exchange by exporting more and high quality of grains and
other agricultural products.
Fertilizer industry in our country has expanded significantly to fulfil Nations hopes and
aspirations for self-sufficiency in food grains by trotting path of planned industrialization.
India continues to be the third largest producer and consumer in the world. There are 63 large
size fertilizer units in the country, manufacturing a wide range of nitrogenous and
phosphoric/complex fertilizers.
National Fertilizers Ltd., is the main Fertilizer producing company in India. This Company
has its four Units, situated at Bathinda, Panipat, Vijaipur and Nangal. This Unit has 16.9%
market share of urea in the country.
Nangal unit, which was taken up for this study has made enormous contribution of the overall
agricultural development in the region. Since its inception the factory has had remarkable
performance with positive finance results and sustained high level of production. The major
objective the project was to analyze working capital of the NFL, Nangal Unit. The other
objectives of the study are as follows:

60

To study the working capital potion of NFL.

To study their cash, receivable and inventory management.

To find out length of their working capital cycle.

To analyze performance and position of the company.

After analyzing the working capital of NFL, Nangal Unit, some draw important conclusions
are drawn about the working of this firm.

The short-term financial position of the firm is not very satisfactory. The liquidity
position of the company is otherwise satisfactory.

The company sells most of its products to the co-operative societies on cash basis. The
debt collection period occurs because of delay in transfer of funds.

The Head Office raises all the equities and debts and the Head Office allocates the
funds to the different units. So the owner and outsiders funds are not clearly known.
And in fact, the interest covered in the profit and loss account is what has been
allocated by the Head Office to this particular Unit.

The cost of production of this company being high, it has been observed that the
subsidy enjoyed by the company in very high. The company gets advantage of the
subsidy from the Govt. of India.

The company should follow a strict policy for depreciation, as depreciation charged by
this company is in a very lump sum amount.

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Presently National Fertilizers Ltd. is the main Fertilizer production company in India. This
Company has its four Units situated at Bathinda, Panipat, Vijaipur and Nangal This unit has
16.9% market share of urea in the country.
Nangal Unit, which was taken up for this study has made enormous contribution of the
overall agricultural development in the region.

Since its inception the factory has had

remarkable performance with positive finance results and sustained high level of production.
After analyzing the working capital of NFL, Nangal Unit, some draw important conclusions
are drawn about the working of this firm. The short-term financial position of the firm is not
very satisfactory. The liquidity position of the company is otherwise satisfactory.
Coming to the receivable management it is found that the debtors turnover was quite high
with a simultaneous effect on low collection period of the Company. The company sells most
of its products to the co-operative societies on cash basis. The debt collection period occurs
because of delay in transfer of funds. LCA policies are adopted where banks are giving
guarantee in cash of non-payment from these cooperative societies. But payments through
Bank engage a lot of time in debt collection as seen from debtor collection table.
Besides all this, the company is not adopting high credit extension policies. While selling to
the private concerns the company is adopting a method of taking advances and securities
from them.
The book value of the net fixed assets of the company are declining rapidly as the company is
charging depreciation at a very high rate which will soon lead it zero value of net value of net
fixed assets in the books of accounts of the Company.
The profitability of this company as shown by the financial statements is not very high. The
net profits are not very high, partly because of high depreciation charged by the company.
Moreover, the company pays comparatively high salaries to its staff. An average worker of
this company receives of Rs.330/- per day and in addition to the many more facilities of
accommodation, hospital, schooling etc.
The Head office raises all the equities and debts and the Head office allocates the funds to the
different units. So the owner and outsiders funds are not clearly known. And in fact, the

62

interest covered in the profit and loss account is what has been allocated by the Head Office
to this particular Unit.
The cost of production of this company being high, it has been observed that the subsidy
enjoyed by the company in very high. Company gets advantage of the subsidy from the Govt.
of India.

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 www.nationalfertilizers.com
Balance sheets of NFL, Nangal for the Financial Year 2011-12, 2012-13, 2013-14
Profit & Loss Statements of NFL, Nangal for the Financial Year 2011-12, 2012-13,
2013-14
Price Store Ledger of NFL, Nangal
Store Manual of National Fertilizers Limited
Purchase Manual of National Fertilizers Limited

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 CO: Corporatr Office

CMO: Cntrale Marketing Office
NFL: national Fertilizers Limited
F & A: Finance & Accounts

65