A

PROJECT REPORT ON
WORKING CAPITAL MANAGEMENT& RATIO ANALYSIS
AT

LUPIN LTD, ANKLESHWAR

YEAR JULY 2016
SUBMITTED TO

PARUL INSTITUTE OF MANAGEMENT AND RESEARCH, BARODA

PARUL UNIVERSITY
IN
A PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE
DEGREE OF
MASTER OF BUSINESS ADMINISTRATION
IN
FINANCE

SUBMITTED BY UNDER GUIDANCE OF

PRAKASH TIWARI MR CHINTAN PRAJAPATI
MBA 3rd SEM FINANCE

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 DECLARATION

I undersigned PRAKASH TIWARI a student of MBA 3RD SEMESTER

SPECIALIZATION IN FINANCE from PARUL INSTITUTE OF
MANAGEMENT AND RESEARCH hereby declare that I have
prepared this project reportand confirm that work done by me is original
and true to the best of my knowledge and belief. It is the result of my
efforts and dedication.

Moreover it has been approved by the management of

LUPIN LTD., Ankleshwar and does not contain any material
objectionable to them. This project is just a part of my college curriculum
and will not be used elsewhere.

Thanking you,

PRAKASH TIWARI

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 No Due Certificate

This is to certify that the following student of PARUL INSTITUTE OF

MANAGEMENT AND RESEARCH had undergone Internship Training
in our company for a period of 1month from

13 JUNE to 20 JULY, 2016.

Name of the student: PRAKASH TIWARI

At the end of the Internship Training we certify that there is nothing due to
us on the part of the student.

Name:

Post:

Date: - JULY 2016

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 ACKNOWLEDGEMENT

SUCCESS IN ANY TASK CAN NOT BE ACHIVED WITHOUT A

PROPER GUIDANCE AND HARDWORK.

It is a great pleasure for me that I am presenting this project. This

project is the outcome of the efforts of many who guided me throughout its
preparation. I am really very much indebted to all of them. So it is my
sincere duty to thank all of them who have directly or indirectly helped me
in this project.

Firstly I would like to heartily acknowledge our Faculty Guide,

Mr.CHINTAN PRAJAPATI for giving us an opportunity to work in
Manufacturing Sector & guiding us in various aspects of the internship
program.

I am also conceded and wish to express my deep sense of gratitude

and sincere thanks to our Company Guide Mr. ASHOK N. PATIL
(ACCOUNTS MANAGER), who imparted his significant knowledge of
Finance Field and Mr. S S PATIL, Mr. D J CHHABRA & Mr.
DHARMESH KAPADIA who are executives and officer of the company,
as they have given their precious time to teach me the fundamentals of
SAP and its functioning in the company.

I am greatly beholden to all those Managers (Finance Department),

who gave their valuable time, to guide us and to help us in our project.

Finally, I would like to thank our college,PARUL INSTITUTE OF

MANAGEMENT AND RESEARCH, to give us such a graceful
opportunity, which made us to enrich our knowledge and to understand the
Real Corporate World.

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 PREFACE:

Practice makes man perfect each and every activity is started for the
accomplishment of some predetermined goals and for this purpose
management is essential and being management student, we have to
undergo Industrial training

In every phase of knowledge being inculcated in students, practical

training in the corporate world plays a significant role in exhibiting and
pruning their capabilities

This Internship program given to me deals with Area of Finance, and the
profile of my project was to Study Companys (LUPIN LIMITED)
WORKING CAPITAL MANAGEMENT & RATIO ANALYSIS.

This report covers the companys Balance Sheets, for the year 2014 &
2015, Products, Competitors, Locations of plants, working capital
management, ratio analysis, companys history, companys profile, and
share holding pattern of lupin limited etc.

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 EXECUTIVE SUMMARY

This Research Project report is made with an objective, to study the

WORKING CAPITAL MANAGEMENT & RATIO ANALYSIS of LUPIN
LIMITED.

Initial stage of the report emphases on the introduction of the organization

its history and its position in the world market. It specifies the research
objectives and its comparison with the previous years.

This research report includes the research methodology of the whole

survey conducted for the analysis and conclusion of the related
comparison. It also covers the profitability aspect, and the companys
growth aspects in the world market.

This report will enable the reader to understand the working capital and
ratio analysis of the company and the other aspects of lupin limited.

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 INDEX

SR NO PARTICULARS PAGE

NO.

1. DECLARATION 2

2. NO DUE CERTIFICATE 3

3. ACKNOWLEDGEMENT 4

4. PREFACE 5

5. EXCECUTIVE SUMMARY 6

6. OBJECTIVES 9

7. INTRODUCTION OF THE ORGANIZATION 10-12

7.1 HISTORY OF THE COMPANY 13

7.2 COMPANY PRROFILE 14-28

7.3 ORGANIZATION STRUCTURE 29

8. INTRODUCTION OF FINANCE DEPARMENT 30-36

9. INTRODUCTION OF THE STUDY 37

9.1 WORKING CAPITAL MANAGEMENT 38-55

9.2 INVENTORY MANAGEMENT 56-62

9.3 RATIO ANALYSIS 63-65

9.3.1 COMPARISION OF RATIOS 66-77

10. TREND PERCENTAGE-LUPIN LIMITED 78-81

11. FINDINGS 82

12. REASEARCH METHODOLOGY 83-85

13. CONCLUSION 86

14. BIBLIOGRAPHY 87

LIST OF TABLES AND CHART

1. TABLE-1 SHARE HOLDING PATTERN 17

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2. TABLE-2 EXPENDITURE ON R & D 26

3. TABLE-3 FOREIGN EXCHANGE EARNINGS & OUTGO 26

4. TABLE-4 PTOFIT AND LOSS ACCOUNT 35

5. TABLE-5 BALANCE SHEET 36

6. TABLE-6 GROSS WORKING CAPITAL 40

7. TABLE-7 NET WORKIG CAPITAL 42

8. TABLE-8 STATEMENT OF CHANGES IN WORKING 44

CAPITAL

9. TABLE-9 TOTAL INVENTORY 57

10. CHART-1 REVENUE COMPOSITION 25

11. CHART-2 TOTAL INVENTORY 58

12. CHART-3 SUNDRY DEBTORS 60

13. CHART-4 CASH & BALANCES 61

14. CHART-5 GROSS SALES & EXPORTS 78

15. CHART-6 EARNINGS PER SHARE & DIVIDEND 79

16. CHART-7 EBIT & PROFIT AFTER TAX 80

17. CHART-8 PROFIT BEFORE TAX 81

OBJECTIVES:

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 Principal objective of this live project is:-

To Study the Companys working capital management & ratio

analysis.

Other secondary objectives are:-

To learn how to do project with a team in a systematic manner and

to coordinate whole team in a same direction to complete the task
successfully in a given period of time.

How efficiently we can implement our theoretical knowledge in

complex practical situations to achieve given task or target.

INTRODUCTION
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 OF THE
ORGANIZATION

INTRODUCTION OF PHARMACEUTICAL IN INDIA

The Indian Pharmaceutical Industry today is in the front rank of Indias

science-based industries with wide ranging capabilities in the complex
field of drug manufacture and technology. A highly organized sector, the
Indian Pharma Industry is estimated to be worth $ 4.5 billion, growing at

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about 8 to 9 percent annually. It ranks very high in the third world, in terms
of technology, quality and range of medicines manufactured. From simple
headache pills to sophisticated antibiotics and complex cardiac
compounds, almost every type of medicine is now made indigenously.

Playing a key role in promoting and sustaining development in the vital

field of medicines, Indian Pharma Industry boasts of quality producers
and many units approved by regulatory authorities in USA and UK.
International companies associated with this sector have stimulated,
assisted and spearheaded this dynamic development in the past 53 years
and helped to put India on the pharmaceutical map of the world.

The Indian Pharmaceutical sector is highly fragmented with more than

20,000 registered units. It has expanded drastically in the last two decades.
The leading 250 pharmaceutical companies control 70% of the market with
market leader holding nearly 7% of the market share. It is an extremely
fragmented market with severe price competition and government price
control. The pharmaceutical industry in India meets around 70% of the
country's demand for bulk drugs, drug intermediates, pharmaceutical
formulations, chemicals, tablets, capsules, orals and Injectable.

INTRODUCTION OF LUPIN LIMITED

Lupin limited founded in 1968, is focused on excellence through

technology and research. Through its facilities in Aurangabad and Tarapur
(Maharashtra),Mandideep (Madhya Pradesh) and Ankleshwar(Gujarat),

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Lupin manufactures intermediates, bulk actives and dosages, including
Phytomedicines, six of lupins API plants have been approved by the
USFDA and two plants(one dosages and one API) have been approved by
the UKMCA. The therapeutic areas include, among others, Anti-TB,
cephalosporins, cardiovascular and non-steroidal, Anti-Inflammatory
Drugs (NSAIPS). The company caters to generics markets in the US and
EUROPE through strategic marketing alliances. Lupins research park in
Pune city near Mumbai, conducts leading edge research in generics, new
chemical entities, novel drug delivery systems (NDDS), oral controlled
release systems (OCRS) and Phytomedicines.

HISTORY OF THE COMPANY

1968 Lupin founded by Dr. DeshBandhu Gupta

1980 Lupin commissions formulation plant and R&D centre at

Aurangabad Ethambutol API production started

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1992 Injectable cephalosporins plant commissioned at
Mandideep Fermentation plant set up at Tarapur
1993 Lupin goes public and is listed on major Indian stock
exchanges
1997 3 Lupin plants receive USFDA approval

2001 LupinResearchPark started at Pune

2004 Branded business started in the US with the launch of

Suprax
2005 Generic business launched in the US with five products

2007 Lupin acquires Kyowa Pharmaceutical industry

company, Japan
2008 Lupin makes acquisitions in Germany, Australia, South
Africa&Philippines.
2009 Lupin Becomes 8th largest generic company in the US

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 COMPANY PROFILE

Name: -Lupin Limited

Year of incorporation: - 1968

Share Capital:-

AUTHORISED SHARE CAPITAL

100,000,000 equity shares of

Equity share capital Rs. 10 each

ISSUED, SUBSRIBED & PAID UP

CAPITAL
88,943,833 Equity shares of
Equity share capital Rs. 10 each

124, GIDC Industrial estate ,

ADDRESS Ankleshwar, Gujarat - 393002

159, C.S.T. Road, Kalina,

REGISTERED Santacruz (East), Mumbai
OFFICE 400098

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 BOARD OF DIRECTORS BANKERS

Dr. DeshBandhu Gupta Central Bank of India

Dr. Kamal K Sharma Bank of Baroda

Mrs. M D Gupta State bank of India

Ms Vinita Gupta Citibank

Mr. Nilesh Gupta ICICI Bank Limited

Mr. K V Kamath Standard Chartered

Bank
Dr. Vijay Kelkar HDFC Bank limited

Mr. Richard Zahn Kotak Mahindra Bank

Limited
Mr.R A Shah The Royal Bank of Scotland

Dr. K U Mada HSBC Limited

Mr. D K Contractor

Mr. Sunil Nair

EXECUTIVE TEAM

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Dr. DeshBandhu Gupta Chairman
Dr. Kamal K Sharma Managing Director
Ms Vinita Gupta Group president &CEO
Mr. Nilesh Gupta Group president &
Executive Director
Mr. Ramesh Swaminathan President- Finance &
Planning
Mr. DivakarKaza President- Human Resource
Development
Dr. NinadDeshpandey President - Pharma
Research & Development
Mr. Harish Narula President- Corporate
Development

AUDITORS

DELOITTE HASKINS & SELLS

COMPANY SECRETARY

MR. R.V. SATNAM

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 SHARE HOLDING PATTERN

Category No of shares Percentage %

Promoters 4,19,31,508 47.14 %
Mutual funds 1,16,26,948 13.07 %
Insurance Cos./Banks/Financial 92,85,682 10.44 %
institutions
Foreign Institutional Investors 1,54,01,679 17.32 %
Foreign Bodies/ Banks 5,69,355 0.64 %
Non Residents 1,32,904 0.15 %
Public 99,95,757 11.24 %
Total 8,89,43,833 100.00 %

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 CHART-1 (SHARE HOLDING PATTERN)

Promoters Mutual Funds Non residents Public Foreign Bodies FII's

10.44

17.32
47.14
0.64
11.24
0.15
13.07

Insurance Cos.

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 LUPINS PRODUCTS

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LUPINS VALUES

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 VISION & MISSION STATEMENT

OUR VISION:-

To be an innovation led transnational Pharmaceutical

Company.

OUR MISSION:-

By end of 2015 they have achieved A BILLION

MARK
(1) To reach the 6 billion mark by 2020.
(2) 15% of turnover from proprietary products.
(3) Two thirds of our turnover from global market.
(4) Onshore presence in all major pharmerging markets which
by 2024 are expected to become equal to the US and JAPAN
put together.
(5) Global standards for all manufacturing plans.

LUPINS LEADERS THINK TANK

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 Lupin is at the tipping point between its Heritage & its Destiny
- Dr. DeshBandhu Gupta

At the heart of Lupins growth story are our people, We outperform

in the marketplace through the outbehaviour of our teams across
the world.
- Dr. Kamal K Sharma

Lupin has clearly broken away from the rest to emerge as the 8 th
largest and the fastest growing Top 10 Generic Business in the US
the only Indian Pharma major to ever achieve this feat.
- Ms Vinita Gupta

Lupin today is the fastest growing among the top 5 IndianPharma

companies. We are now poised to go for leadership.
- Shakti Chakraborty

The Company is building brands that will be key drivers for value
creation.
- Harish Narula

Lupin expects its formulation business to thrive on the back of

efficiencies stemming from its in house APIs and intermediates.
- Naresh Gupta

COMPETITORS

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 LIMBIC MANN

RANBAXY INTAS

CIPLA CADILA

GLAXO SMITH LINE ALACRA STORE

TYPES OF COMMUNICATION CHANNEL

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The communication channel that exists in Lupin Ltd, Ankleshwar is of two
type i.e. Formal & Informal communication channel.

1. FORMAL COMMUNICATION CHANNEL:

The formal communication channel is consisting of Upward, Downward &

Horizontal communication.

Upward Communication : Upward communication is done from

bottom level to top level i.e. lower level. People report to higher level
people.
Downward Communication : Downward communication is done from
Top level to bottom level i.e. higher level People pass information to
bottom level.
Horizontal Communication : Horizontal communication is done
between different departments.

2. INFORMAL COMMUNICATION CHANNEL:

In Lupin informal communication grows, special integration among the

people who work together & this communication provides useful
information for event to come. Generally, the person of the same level
(peers, friend) use informal communication channel and it is faster than the
formal communication channel.

COMPANYS PERFORMANCE
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 Consolidated Sales rose to Rs. 47,678 million registering 25%
increase over the previous year.

Net profit rose to Rs. 6816 million registering 36% increase over
the previous year.

Board recommends Dividend at 135% for FY 2014-15.

EBIDTA margins increase to Rs. 9981 million registering a growth

of 34%.

In FY 2014-15, the company channelized . 4433 million on capital

expenditure.

Lupins FCCB bonds were amongst the few that continued to be

quoted well above par, and all the residual bonds have been already
redeemed or converted into shares.

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 CHART-2 (REVENUE COMPOSITION)

REVENUE COMPOSITION(%)

API 16%
DOMESTIC FORMULATIONS

49%

EMERGING MARKETS FORMULATIONS ADVANCED MARKETS FORMULATIONS

28%

7%

Lupins sources of revenue are as follows:- 1) Domestic

formulations
2) Emerging markets
Formulations
3) Advanced markets
Formulations
4) API

The international business sales for FY 2014-15:-

(Rs. In Millions)

API 5562
FORMULATIONS 26405
Total 31967

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 EXPENDITURE ON R & D:-

(Rs. In Millions)

PARTICULARS 2013-14 2014-15

CAPITAL 441.6 681
RECURRING(EXCLUDING 2227.5 3438.1
DEPRECIATION)

TOTAL 2669.1 4119.1

TOTAL R&D EXPENDITURE
AS A PERCENTAGE OF NET 7.1% 8.7%
SALES

FOREIGN EXCHANGE EARNINGS AND OUTGO:-

( Rs. In Million)

PARTICULARS 2013-14 2014-15

Foreign exchange earned 16779.9 21531.9

Outgo of foreign exchange 7458.1 7881.8

COMPANYS PROFILE AND PLANTS

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Lupin intends to consciously transform itself from being a Pharma
company into one that offers end to end solution to the medical
community.

Ankleshwar unit is well connected with other parts of the country

through national highway no. 8 & western railway. Nearest port is
kandla and Dahej.

BOISAR PLANT, THANE, MAHARASHTRA

MANDIDEEP PLANT, RAISEN, MADHYA

PRADESH

ANKLESHWAR PLANT,BHARUCH, GUJARAT

CHIKALTHANA PLANT, AURANGABAD,

MAHARASHTRA

VERNA PLANT, GOA

KARTHOLI PLANT, BARIBRAHMANA,

JAMMU

DABHASA PLANT, VADODARA, GUJARAT

PITHAMPUR PLANT, DHAR, MADHYA

PRADESH

MULSHI PLANT, PUNE, MAHARASHTRA

SANDA PLANT, HYOGO, JAPAN

R & D CENTRES

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MAHARASHTRA JAPAN
MAHARASHTRA
PUNE, HYOGO,
,PUNE,
PASHAN, SANDA,
MULSHI TALUKA
CENTRE, INDUSTRY CO. LTD,
PARK,
BIORESEARCH PHARMACEUTICAL
LUPIN LUPIN RESEARCH KYOWA

STOCK CODES

The stock codes of the company are:

BSE 500257
NSE LUPIN

CORPORATE INDENTITY NUMBER (CIN)

CIN of the Company allotted by the Ministry of Corporate Affairs,

Government of India:

L24100MH1983PLCO29442

ORGANIZATION STRUCTURE

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Page | 30
 INTRODUCTION
OF
FINANCE
DEPARTMENT

ROLE OF FINANCE DEPARMENT

Finance denotes money which is essential to initiate and operate

business enterprise. The term finance means provisions of money
at the time when it is required. Literally speaking, the term business
finance means the finance needed to conduct the business activities.
Modern business units require huge fixed and working capital to
conduct the business activities. The promoters have to calculate the

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financial needs of the business and arrange for collection of required
finance.

Finance department is the place where the financial decisions are

taken by the department heads of the organization. So every
organization has the Finance department to take care of the financial
needs of the business. The finance department has different sections
and the sections are taken care of by the people concerned with the
sections. Finance is needed initially and also throughout the life of a
firm/company.

An ambitious business plan will remain only on paper if there is

dearth of adequate money to transform it into reality. Modern
business is capital intensive and naturally finance department acts as
a controlling nerve center of business. Finance
Department acts as a lubricant keeping the machinery of finance in
business in a continuous state of activity. Finance department is as
important as any other function in business management.

Finance Department Structure

DEPUTY GENERAL
MANAGER

MANAGER

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 SENIOR SENIOR SENIOR
EXECUTIVE EXECUTIVE EXECUTIVE

EXECUTIVE EXECUTIVE OFFICER JUNIOR

OFFICER

ACCOUNTING METHOD:-

In LUPIN LTD. mercantileaccounting system (Double entry system) is

being followed.

BASIS OF ACCOUNTING

The financial statements are prepared as per Historical cost convention.

All income and expenditure having material bearing on the financial

statements are recognized on accrual basis.

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Depreciation is provided on a straight line basis at rates and in the manner
specified XIV to the Companies Act, 1956.

Cash flow statements are prepared in accordance with INDIRECT

METHOD.

SOURCE OF FINANCE:-

The company has both short term and also the long term sources of
finance. The company has Equity share, loans from banks as a long term
sources of finance. The company has loans from the financial institutions,
bank loans as the short term finance.

FUNCTIONS OF FINANCE DEPARMENT

Location revenue and capital budget preparation.

Comparison of actual expenses vs. budget and analyses the variance.
Uploading revenue and capital budget in SAP system.
Scrutiny of Account & Covent Availed & Utilization.
Preparation of monthly MIS consists of PM, PM utility and
overhead.
Monitoring Account and Audits.
Capitalization of Fixed assets provide by the local project/head
office.
Monthly monitoring the plan given by Head office.
Timely payment of statutory dues like excise, income tax, TDS etc.
Issuing of TDS & TCS certificates to the party on monthly basis.
Quarterly/Annual TDS, E-return for salary, professional, contractors.
Half yearly TCS return for scrape sales.
Preparations of cheque for suppliers payment.

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 Monitoring the advances if any given and adjusting with the bill.
Payment of salary & perks.
Collection & recording the investments proof of employee for
income tax.
Service tax collection payment and taking credit for utilization of
excise duty payments.

PROFIT AND LOSS ACCOUNT

Rs. in million

PARTICULARS Current Year Previous Year

ended ended
31.03.2015 31.03.2014
INCOME
Sales (Gross) 36,660.6 29,419.4
Less: Excise Duty 259.7 433.8
Sales (Net) 36,400.9 28,985.6
Other Operating Income 684.2 985.7
Other Income 41.0 38.3
37,126.1 29,709.6
EXPENDITURE
Cost of Materials 14,927.7 12,418.5
Personnel Expenses 3,765.5 3,344.7
Manufacturing and Other Expenses 10,246.8 8,153.9
Interest and Finance Charges 283.8 415.2
Depreciation and Amortisation 815.7 663.5
30,039.5 24,995.8
Profit before Tax 7,086.6 4,713.8
Provision for Taxation
-Current Tax (including Wealth Tax) 1,161.2 502.6
Less: MAT Credit Entitlement (794.4) (222.9)
-Deferred Tax 230.5 115.2
-Fringe Benefit Tax - 149.2
Net Profit after Tax 6,489.3 4,169.7
Add: Surplus brought forward from P.Y. 6368.5 4,910.1
Amount available for Appropriation 12,857.8 9,079.8

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APPROPRIATIONS
-Transfer to General Reserve 1,500.0 1,500.0
-Proposed Dividend on Equity Shares 1,200.7 1,035.3
-Dividend on Equity Shares for P.Y. 10.8 0.1
-Corporate Tax on Dividend 201.2 175.9
Balance Carried to Balance Sheet 9,945.1 6,368.5
12,857.8 9,079.8
Earnings Per Share Basic 75.38 50.58
-Diluted 74.08 50.07
Face Value of Equity Shares (in Rs.) 10.00 10.00

BALANCE SHEET

Rs. in million

PARTICULARS Current Year Previous Year

ended ended
31.03.2015 31.03.2014
SOURCES OF FUNDS
Shareholders Funds
Share Capital 889.4 828.2
Reserves and Surplus 24,416.1 12,924.8
25,305.5 13,753.0
Loan Funds
Secured Loans 7,040.0 5,651.2
Unsecured Loans 2,028.1 3,797.9
9,068.1 9,449.1
Deferred Tax Liabilities 1,582.5 1,347.3
TOTAL 35,956.1 24,549.4
APPLICATIONS OF FUNDS
Fixed Assets
Gross Block 16,165.2 13,313.7
Less: Depreciation and Amortisation 4,251.3 3,557.5
Net Block 11,913.9 9,756.2
Capital Work in Progress 1,408.3 1,163.1
13,322.2 10,919.3
Investments 7,240.7 4,738.7
Current Assets, Loans and Advances
Inventories 7,137.0 7,158.8
Sundry Debtors 9,165.9 7,090.6

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Cash and Bank Balances 374.2 121.3
Loans and Advances 6,466.0 3,666.4
23,143.1 18,037.1
Less: Current Liabilities and Provisions
Current Liabilities 6,081.8 7,721.8
Provisions 1,668.1 1,423.9
7,749.9 9,145.7
Net Current Assets 15,393.2 8,891.4
TOTAL 35,956.1 24,549.4

INTRODUCTION
OF THE
STUDY

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 WORKING CAPITAL MANAGEMENT

Any enterprise whether industrial, trading or other acquires two types of

assets to run its business as has already been emphasized time and again. It
requires fixed assets which are necessary for carrying on the
production/business such as land and buildings, plant and machinery,
furniture and fixtures etc. for a going concern these assets are of permanent
nature and are not to be sold. The other types of assets required for day to
day working of a unit are known as current assets which are floating in
nature as keep changing during the course of business. It is these current
assets which are generally referred to as working capital.

A set of financing pattern is evolved to meet the requirement of a unit

for acquisition of fixed assets and current assets. Fixed assets are to be
financed by owned funds and long-term liabilities raised by a unit while
current assets are partly financed by long-term liabilities and partly by
current liabilities and other short-term loans arranged by the unit from the
bank.

The total current assets with the firm may be taken as gross working
capital whereas the net working capital with the unit may be calculated as
under:

Net Working Capital = Current Assets Current Liabilities

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Page | 39
This net working capital is also sometimes referred to as liquid surplus
with the firm and has been margin available for working capital
requirement of the unit. Financing of working capital has been the
exclusive domain of commercial banks while they also grant term loan for
creation of fixed assets either on their own or in consortium with State
level/All India financial institutions. The financial institutions are also now
considering sanction of working capital loans.

Concepts of working capital:-

There are two concepts of working capital:-

(1) Gross Working Capital:The term Gross working capital

refers to the sum of all current assets of the enterprise employed in
the business process. This is a going concern, so the finance manager
is highly concerned with the management of assets with a view to
bringing about productivity from other assets.

It refers to the firms investment in current assets. Current assets are

the assets which can be converted into cash within an accounting
year or operating cycle and it includes cash, short-term securities,
debtors, bills receivables and inventories.

(Rs. in million)

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 CURRENT ASSETS 2012-2013 2013-2014 2014-2015

Inventories 6,258.5 7,158.8 7,137.0

Sundry debtors 6,322.6 7,090.6 9,165.9

Cash & bank balances 2,150.8 121.3 374.2

Loans & advances 2,547.6 3,666.4 6,466.0

GROSS WORKING 17,279.5 18,037.1 23,143.1

CAPITAL

The gross working capital of company contains current asset. The

value of gross working capital in increasing in last 3 years. It was
highest in 2014-2015. Investments in current asset should be judge
adequately, not more or less, to the need of the business firm.
Excessive investment in current assets should be avoided because it
impairs the firms profitability, as idle firm investment earns
nothing. Inadequate amount of working capital can threaten the
solvency of the firm because of its inability to meets its current
obligations. Here we can see that most of the investments in current
assets is done into account receivables and inventories.

(2) Net working capital: - The Net working capital can be

defined as the difference between current assets and current
liabilities. It is also that portion of current assets which is financed
by long term funds.

Thus, the gross concept is in nature of quantitative definition that

focuses attention on the level of current assets for given activity.

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 Whereas net working concept is in nature of a quantitative definition
which highlights the character of the sources from which the funds
have been procured to support that portion of current assets which is
in excess of current liabilities.

In conclusion, we can say that working capital management includes

both the management of current assets and current liabilities.

The goal of working capital management is to manage the firms

current assets and current liabilities in such a way that a satisfactory
level of working capital is maintained.

The major thrust is on management of current assets, this is because

current liabilities arise in context of current assets.

(Rs. in million)

PARTICULARS 2012-2013 2013-2014 2014-2015

Current Assets, loans & 17,279.5 18,037.1 23,143.1

Advances

Current liabilities & 5,466.5 9,145.7 7,749.9

Provisions

NET WORKING 11,813.0 8,891.4 15.393.2

CAPITAL

Page | 42
 REASONS FOR INCREASE IN NET WORKING CAPITAL:

(1) Increase was recorded in cash and bank balance by 252.9

million Rs.
(2) Increase was recorded in loans and advances by 2799.6 million
Rs.
(3) Tremendous deduction was recorded in other liabilities by
2357.5 million Rs.

There was increase in different liabilities and provisions like gratuity,

proposed dividend on equity shares, unclaimed dividend, interest accrued
but not due on loans etc.

Page | 43
TYPES OF WORKING CAPITAL:-

There are two types of working capital. This classification is done on the
basis of time. They are:-

(1) Permanent Working Capital: This type of working capital

represents current assets required on a continuous basis over the
entire year. A manufacturing enterprise has to keep maintain
minimum amount of inventories, necessary to ensure uninterrupted
production as well as sales. It has the following characteristics:

It is classified on the basis of the time factor.

It constantly changes from one asset to another and continuous to
remain in the business process.
Its size increases with the growth of business operation.

(2) Temporary or Variable Working Capital: This type of working

capital represents the additional assets which are required at
different times during the operating year i.e. additional inventory,
extra cash, and etc. Seasonal working capital is the additional
amount of current assets particularly cash, receivables and inventory
which is required during the more active season of the year. The
characteristics of variable working capital are:

It is not always gainfully employed, though it may change from one

asset to another, as permanent working capital does.

STATEMENT OF CHANGES IN WORKING CAPITAL

Page | 44
PARTICULARS 2013-14 2014-15 INCREASE DECREASE

CURRENT
ASSETS

Inventories 7,158.8 7,137.0 21.8

Sundry Debtors 7,090.6 9,165.9 2075.3

Cash And Bank 121.3 374.2 252.9

Balances

Loans And 3,666.4 6,466.0 2799.6

Advances

(A) 18,037.1 23,143.1

CURRENT
LIABILITIES
Current Liabilities 6,081.8 1640
7,721.8
Provisions 1,423.9 1,668.1 244.2

9,145.7 7,749.9
(B)
NET WORKING 8891.4 15393.2 6767.8 266
CAPITAL(A-B)
INCREASE IN 6501.8 6501.8
WORKING
CAPITAL
TOTAL 15393.2 15393.2 6767.8 6767.8

Determination of ideal W. C. Requirement

Page | 45
For the determination of ideal W.C. Requirement it depends on
followingmain perspective. They are as follows

For the assessment of W.C. requirement it mainly depends upon

raw material.
In manufacturing concern to precede sales one must require raw
material.
For availability of raw material cash is required and this cash is
received from Debtors as receivables.
After raw material is purchased, this raw material is sent for
process and when process gets over it is again converted into
finished goods.
Once finished goods are ready it is sent in packing, after this is
sent for sales.
The goods may be sold on credit and debtors are generated and
after allowing few days credit period based on some policy of
company cash is collected.
For the collection of cash some rules and regulations are framed and
these policies are framed by marketing department.
There would not be zero debtors ever in organization. If so then it
affects operating cycle of organization.
Further W.C. required depends upon type of business whether
trading and manufacturing
As this is manufacturing unit it will have different requirement
different requirement of W.C. and if there would be any service
organization then its requirement would be different.
Requirement of working capital depends upon size of business too.
In large scale business requirement would be more than small and
medium scale.
If there would be large size of business, it means production process
would be longer.

Page | 46
 Further WC is also determined on the basis of type of material (like
Perishable goods) is used then one cannot store or hold goods for
long time span.
For the proper flow of operating cycle raw material required is
must and it is also important to determine its availability (of raw
material) that is whether it is locally/ with state/ county or to import
available.
As explained earlier there are some policy and rules regarding
debtors, creditors, etc.
After WIP (material) now it is converted into finished goods then it
is sent for packing of finished goods.
After packing of finished goods then goods are sent in sales and
distribution department.
Now from there either goods are sold on outright sales or
consignment sales.

Goods are sold either in domestic sales i.e. within boundary of

country or overseas sales i.e. outside boundary of country.
When finished goods come in sales and distribution department
from there terms of sales are determined. Whether to allow credit
or not is decided from this department only.
If credit is allowed then what would be credit policy will be
decided by the company.
By keeping in mind current market scenario i.e. the market
trend, competitors terms, the peak and lean period, etc. WC is
determined.For ideal working capital one must consider current
market scenario and estimated market scenario.
Thus this way for determining ideal working capital requirement. As
we know there is no ideal formula for determination of working
capital.

Page | 47
 DETERMINE IDEAL W.C. REQUIREMENT:
Assessment of working capital is always done for future period,
while the financial statements reveal the financial position of a
concern as it was at some point of time in the past.

If the calculations are based on the basis of the financial statements

as on some previous date, the results derived may not be workable.
Furthermore the newly established units may not provide any
financial statements for the past period. The working capital is
always to be assessed on the basis of projections for the next year.

The first most important point, therefore, is to make as accurate

projections as possible for the next year.

The projections submitted to the bank are very critically examined

in relation to past performance of the unit, if there is any future
prospects and market for the ultimate product, production capacity
of the unit and general rate of inflation expected during the year

OPERATING CYCLE CONCEPT:

The day to day operations of concern of any nature and size involves
many successive steps and final working results would depend on the
effective combination of all these steps. The steps in general may
include:

Acquisition and storage of raw material and other stores and

spares required for manufacture of any product.

Actual production process when the raw material is subjected to

different processes to bring it to final shape of finished goods.

Page | 48
 Storage of finished goods awaiting sales.

Sales of finished goods awaiting sale proceeds.

All these steps put together form an operating cycle which can also be
represented diagrammatically as under:

Realization Cash Raw Materials Stores &

Spares

B/R, SD Semi-Finished Goods

Sales Finished Goods

Page | 49
We start from cash to buy raw material etc. and after completing all the
steps end up with the cash. The intervening period required for completion
of this entire process is the Operating Cycle. The operating cycle may
thus be defined as the intervening period from the time the goods or
services enter the business till their realization in cash. The study of this
operating cycle is obviously very important as the actual requirement of
the unit may be limited to the funds required to complete an operating
cycle and the simplest formula for the working capital requirement may
be represented as under:

Total operating expenses expected

during the year

Total working capital requirement=

Number of operating cycles in a year.

This system of calculation of working capital requirement is not in vogue

as to only help to assess the total requirement of a unit whereas the banks
granting working capital limits would be interested in proper classification
of its various components. The concept of operating cycle, however, of
these items for throws light on various components of working capital
required for the unit and these components may be classified as under:

Raw material, stores and spares consumed in the production process.

The unit must have some stocks of these items for uninterrupted
production.

Page | 50
 Manufacturing expenses such as wages, power and fuel etc. to be
incurred during the process of manufacture.

Stocks of work-in-process/semi finished goods maintained by the

unit to complete an operating cycle.

Stocks of finished goods awaiting sale. All the finished goods may
not be immediately sold.

Administrative and selling expenses during this process.

Bills receivables/debtors for credit sales.

All or some of these components in varying proportions are required for

any business.

SANCTION OF TIMELY WORKING CAPITAL

FACILITIES AND RELEASE OF FUNDS FOR MEETING
NEED-BASED REQUIREMENTS:-

Depending upon the quantum of working capital finance required

there are other relevant factors, the bank associated with the
appraisal of project may either meet the working capital requirement
of the entrepreneur himself or enter into consortium agreement with
other banks. This consortium of banks should be simultaneously
finalized while appraisal for term loan is being completed.

Page | 51
 The working capital limits are to be sanctioned by the lending bank
either as sole financing bank or under consortium arrangements
immediately after sanction of term loans. Where, however, banks
have not, for any reason, participated in the appraisal of the project,
the lead financial institution will keep the bank which is to provide
maximum working capital finance informed about the appraisal and
sanction of term loan assistance to the project.

An in-principle sanction of working capital limits should be

communicated by that bank to the borrower as well as to the lead
financial institution soon after the sanction of term loan assistance.

The assessment of the lead bank of the initial working capital limit
should be accepted by other participating banks in the consortium in
order to avoid delay.

In order to obviate difficulties which inadequate working capital

limits may create for the promoter, the lead bank must review the
limits already sanctioned about 6 months before the commencement
of commercial production.

While sanctioning such limits banks are required to take into

account the requirement for working capital for achieving the level
of production envisaged for the second year of production.

Banks must communicate the formal sanction at least three months

before the commencement of commercial production.

Page | 52
 The release of funds under the sanction will, however, be dependent
upon actual needs of the borrower on one hand and build up of
chargeable assets on the other hand.

Operating cycle approach to working capital management:

This title is more expressive in the sense that the normal business
operations of a manufacturing and trading company start with cash, go
through the successive segments of the operating cycle, viz, raw material
storage period, conversion period, finished goods storage period and
average collection period before getting back cash along with profit.

The total duration of all the segments mentioned above is known as gross
operating cycle period. In case the company is placed in an advantageous
position of being able to sell its products for cash then the segment of
average collection period will disappear from the gross operating cycle
period and to that extent the total duration of the cycle gets reduced.

Page | 53
In cash advance payments are to be made for procuring materials, the
operating cycle period and to that extent the total duration of the cycle get
reduced. In case advance payments are to be made for procuring materials,
the operating cycle period increases. The purchases of raw materials,
components etc.

Studied Annual operating plan:

AOP is prepared with the involvement of 4 major departments i.e.,

Accounts & Finance, Marketing, Materials and Operating
department. It also includes ERE i.e., employee related expenses.

First of all marketing department makes estimation i.e. product wise

sales (export and Indigenous), market trend, volumes, plant capacity
and input cost.. This product wise sale depends also on season. In
other words we can say that according to demand of seasonal
products sales estimation changes and accordingly we have to make
alterations in estimation.

After the marketing department Operation departments plays a

major role i.e.-to check the quantity produced and-expansion

Page | 54
 marketing department will check and see that whether according to
product wise sales they meet quantity produce or not.

If marketing department says that it is more or less then accordingly

it has to expand or contract or contract unit purchased.

For the purpose of expansion it has to go for capital projection.

On the other half operation management also deals with CAPEX

(basically it involves insurance)

AOP also includes ERE i.e. employee related expenses it is handled

by Human Resource department.

ERE includes salary/ wages/ bonus/,-gratuity/ superannuation (tie

up with LIC), others and New recruiters (all departments intimate to
HR department that which department requires man power).

By keeping in mind all points details are given for AOP preparation.

And after all these Material department comes into picture. After the
estimation of Marketing, Material, Operation and Human resource
department all the details are given to MIS i.e., Management
Information System.

Now, MIS concern will feed all data into system and prepare a
report.

After the preparation of AOP now that report/statement will be send to

board for approval and signature.

Studied RRP (Rerolling plan):

Page | 55
 RRP is a plan prepared month wise. For preparing RRP again it is
intimated by all departments i.e. marketing, HRM, operations, EHS,
materials and finance. Finally it would be send to MIS concern and
then send for approval to MD.

Suppose for the month of May RRP will be prepared in April month
by estimating change in rates, prices, competition etc. into market.

Basically these RRP is prepared because of changing market

scenario i.e. its rate of exchange, price currency, competition into
market etc.

After the RRP is prepared actual is prepared and on basis of RRP

and actual, variance is prepared.

Inventory:

Meaning:

A listing of all goods contained in a shipment. It is used as a

condition report by claims and as a receipt of acceptance of the household
goods by the customer, also called households goods Descriptive
inventory.

In business management inventory consist of a list of goods and

materials and available in stock. An inventory can also be a self
examination, a moral inventory.

Type of inventory:

Page | 56
Raw Material Inventory:

The investment in raw materials inventory is estimated on the basis of

Budgeted Cost of raw Average inventory

* *
Production Materials per unit holding period

12 Months/ 365 Days

Work in progress inventory:

The relevant costs to determine work in progress inventory are the

proportionate share of raw materials and conversion cost (labor and
manufacturing overhead costs excluding depreciation).
Budgeted Estimated work in Average time span working
Production
* process cost per unit * process inventory

12 Months/ 365 Days

Finished goods Inventory:

Working capital required goods inventory is given by factors

Budgeted Cost of goods produced per Finished goods
Production * unit excluding depreciation * holding period

12 Months/ 365 Days

Sr.
No
Particulars 2012-2013 2013-2014 2014-2015
.

1 Raw Materials 1,735.6 2,371.4 2,307.3

2 Packing Materials 393.2 384.6 449.1

3 Work in Process 1,499.3 1,833.8 1,728.8

Page | 57
4 Finished Goods 2,487.6 2,407.7 2,492.9

5 Consumable stores, 142.8 161.3 158.9

spares & fuel

6 Total Inventory 6,258.5 7,158.8 7,137.0

TOTAL INVENTORY
7,400.00

7,200.00 7,158.80 7,137.00

7,000.00

6,800.00 TOTAL INVENTORY

6,600.00

6,400.00
6,258.50
6,200.00

6,000.00

5,800.00

Page | 58
Interpretation:

Calculation of total inventory of LUPIN LIMITED for the year 2012-13 is

6,258.50 Rs. million, 2013-14is Rs. 7,158.80 million and 2014-15 is Rs.
7,137.00 million. So that there is the good sign for the company because
inventory increase year by year. Therefore current assets is also increasing
and the company become internally more strong than externally.

Sundry debtors:

Debtors

The tied up debtor should be estimated in relation to total cost price

(excluding depreciation).

Budgeted Credit * Cost of sales per unit * Average Debt

sales (in unit) collection period Collection period

12 Months/ 365 Days

Page | 59
 Rs.in million

Particulars 2012-2013 2013-2014 2014-2015

6,322.6 7,090.6 9,165.9

Total Sundry
Debtors

SUNDRY DEBTORS
10,000.00 9,165.90
9,000.00
8,000.00
7,090.60
7,000.00 6,322.60
6,000.00 SUNDRY DEBTORS
5,000.00
4,000.00
3,000.00
2,000.00
1,000.00
0.00

Page | 60
Interpretation:

Calculation of sundry debtors of LUPIN LIMITED for year ending 2013,

2014 and 2015 is Rs. 6,322.60 million, 7090.60 million and 9,165.90
million, respectively. This data indicates in that firms sundry debtors are
also increasing year by year and this amount will get anytime in future so
that it is also helpful to increase the current assets of the firm, but firm has
to become careful about these situation because debt is always risky.

Cash and Bank balance:

Apart of the need for financing inventories and debtors, firm should also
have some minimum cash balance with them. It is to lay down the exact
procedure of determining such an amount. This would primarily base of
the motive for holding cash balances of the business firm attitude of the
management towards risk. The access to the borrowing source in time of
needs and past experience and so on.

(Rs.in million)

2014-2015
Particulars 2012-2013 2013-2014

Cash & bank 2,150.8 121.3 374.2

balances

Page | 61
 CASH AND BANK
2,500.00
2150.8
2,000.00

1,500.00 CASH AND BANK

1,000.00

500.00 374.2
121.3
0.00

Interpretation:

Calculation of Cash and bank balance of LUPIN LIMITED for the year
ended 2013, 2014, and 2015 is Rs.2,150.80 million,Rs.121.3 million &Rs.
374.2 million, respectively. The comparison of year 2013 to year 2015
shows that the balance in bank is decreasing from 2014onwards which is
not a good sign. Cash and bank balance should be always given first
importance in working capital so that utility of a company is stronger than
other.

Page | 62
 RATIO ANALYSIS

The financial statements as prepared and presented annually are of little

use for guidance of prospective investors, creditors and even management.
If relationships between various related items in these financial statements
are established, they can provide useful clues to gauge. Accurately the
financial health and ability of business to make profit. This relation
between two related items of financial statements is known as ratios.

A ratio, is thus, one number expressed in terms of another, e.g. in order to

obtain the rate of return on paid up capital, the net profit of the business is
divided by the paid up share capital. The figure so obtained is the ratio. If
the same is multiplied by 100, a percentage rate of return on paid up

Page | 63
capital is obtained. A ratio is customarily expressed in three different ways.
It may be expressed as a proportion between two figures. The use of ratios
has become increasing popular during last few years only.

Originally the bankers used the current ratio to judge the capacity of the
borrowing business enterprises to repay the loan and make regular interest
payments. Today, it has assumed such an importance that anybody
connected with the business turns to ratio for measuring the financial
strength and earning capacity and future prospects. A banker or the creditor
will measure the repaying capacity and financial strength on the basis of
accounting ratios

FUNCTIONAL CLASSIFICATION OF RATIOS

Ratios are also grouped in accordance with certain tests. On the basis there
are four categories of ratios.

(1) LIQUIDITY RATIOS: - These ratios indicate the position of

liquidity. They are computed to ascertain whether the company is
capable of meeting its short term obligations from its short term
resources. Liquidity ratios can be calculated in three ways,
(I) CURRENT RATIO
(II) LIQUIDITY RATIO
(III) ACID-TEST RATIO

(2) PROFITABILITY RATIOS: - Profit is the main objective of any

business enterprise. Besides, profitability is the measure of
efficiency. The owners invest their funds in the expectation of

Page | 64
 receiving reasonable return and so profitability is important from
their point of view. Besides, Profits provide money for paying the
debts incurred. A number of ratios are designed to indicate the
profitability ratios they are as follows.
(I) GROSS PROFIT RATIO
(II) NET PROFIT RATIO
(III) EXPENSES RATIO
(IV) OPERATING RATIO
(V) RETURN ON CAPITAL EMPLOYED RATIO
(VI) RETURN ON SHAREHOLDERS FUNDS
(VII) DEBT SERVICE COVERAGE RATIO

(3) LEVERAGE RATIOS: -Leverage means proportion of owners

capital to debt capital. It shows the proportion of outside funds used
in business as compared to funds provided by the owners in terms of
share capital, reserves etc. Leverage ratios can be indicated by four
ways they are as follows.
(I) PROPRIETARY RATIO
(II) DEBT-EQUITY RATIO
(III) GEARING RATIO
(IV) FIXED ASSESTS RATIO

(4) ACTIVITY OR EFFICIENCY RATIOS: - The activity ratio

measures the efficiency with which assets are being used in
business. They are also known as Turnover Ratios, as these ratios
show how fast the assets are being turned into sales. The higher this
ratio, the more efficiently the assets are being used in business.
(I) DEBTORS RATIO
(II) CREDITORS RATIO
(III) TOTAL ASSETS TURNOVER RATIO
(IV) DEBT SERVICE COVERAGE RATIO

Page | 65
 COMPARRISION OF RATIOS

(1) CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES

Current ratios for the various years obtained for the

company as follow:

2012-13: 17,279.5 = 3.16 or 3:1

5,466.5

2013-14: 18,037.1 = 2 or 2:1

9,145.7

2014-15: 23,143.1 = 3 or 3:1

7,749.9

It is generally believed that 2:1 ratio shows a comfortable working capital

position. i.e. the current assets should be twice the current liabilities. It is
the measure of short-term financial strength of the business and shows
whether the business will be able to meet its current liabilities, as and when
they mature. We can see that LUPIN LIMITED has maintained a quite

Page | 66
good balance between current assets and current liability this shows that it
is able to meet its current liabilities.

(2) LIQUID RATIO = LIQUID ASSETS

LIQUID LIABILITIES

Liquid ratios for the various years obtained for the

company as follow:

2012-13: 11,021 = 2.01:1

5466.5

2013-14: 10,878.3 = 1.18:1

9,145.7

2014-15: 16,006.1 = 2.06:1

7,749.9

A variant of current ratio is the liquid ratio or quick ratio which is designed
to show the amount of cash available to meet immediate payments. If the
liquid assets are equal to or more than liquid liabilities, the condition may
be considered as satisfactory. We can see that LUPIN LIMITED has
maintained a good liquid ratio.

Page | 67
 (3) ACID-TEST RATIO = QUICK ASSETS
LIQUID LIABILITIES

Acid-test ratios for the various years obtained for the

company as follow:

2012-13: 4,698.4 = 0.85:1

5,466.5

2013-14: 3, 787.7 = 0.41:1

9,145.7

2014-15: 6,840.2 = 0.88:1

7,749.9

The measure of absolute liquidity may be obtained by comparing only cash

and bank balance as well as readily marketable securities with liquid
liabilities. This is very exacting standard of liquidity and it is satisfactory if
the ratio is 0.5:1. We can see that LUPIN LIMITED has maintained a
reasonable rate of liquidity in year 2012-13 & 2014-15.

Page | 68
 (4) GROSS PROFIT RATIO = GROSS PROFIT * 100
SALES

Gross profit ratios for the various years obtained for

the company as follow:

2012-13: 14,474.7* 100 =57%

25,436.9

2013-14: 16,567.1 * 100 =57%

28,985.6

2014-15: 21,473.2* 100 =59%

36,400.9

This ratio is usually expressed as a percentage. The ratio shows whether

the markup obtained on cost of production is sufficient. There is no
standard showing reasonableness of gross profit ratio. However it must be
enough to cover its operating expenses. We can see that LUPIN LIMITED
has maintained a quite good gross profit. If this ratio is low it indicates that
the cost of sales is high or that the purchasing is inefficient.

Page | 69
 (5) NET PROFIT RATIO = NET PROFIT * 100
SALES

Net profit ratios for the various years obtained for the
company as follow:

2012-13:4,433.8 * 100 = 17%

25,436.9

2013-14:4,169.7* 100 = 14%

28,985.6

2014-15:6,489.3* 100 = 18%

36,400.9

The ratio is valuable for the purpose of ascertaining the over-all

profitability of business and shows the efficiency or otherwise of operating
the business. It is the reverse of the operating ratio. We can see that LUPIN
LIMITED has decreasing net profit ratio and we have seen that the gross
profit is moving up in a stable manner. It shows that LUPINS
administrative expenses are slowly rising.

Page | 70
 (6) OPERATING RATIO =
COST OF SALES + OPERATING EXPENSES * 100
SALES

Operating ratios for the various years obtained for the

company as follow:

2012-13:18,511.5 * 100 = 73%

25,436.9

2013-14:20,572.4* 100 = 71%

28,985.6

2014-15:25,174.5* 100 = 69%

36,400.9

It is a ratio showing relationship between cost of goods sold plus operating

expenses and net sales. It shows efficiency of the management. The higher
the ratio the less will be the margin available to proprietors. We can see
that LUPIN LIMITED has controlled the ratio and the % coming down
year by year. It shows that the management is efficient.

Page | 71
 (7) RETURN ON CAPITAL EMPLOYED =
NET PROFIT * 100
SHARE CAPITAL+RESERVES+LONG
TERM LOANS

Return on capital employed for the various years

obtained for the company as follow:

2012-13:4,433.8 * 100 =24%

18,779.3

2013-14:4,169.7* 100 = 21%

19,404.2

2014-15:6,489.3* 100 = 20%

32,345.5

It is an index of profitability of business and is obtained by comparing net

profit with capital employed. The success or otherwise is judged with the
help of this ratio. It is perhaps the most important ratio from the view point
of management. We can see that LUPIN LIMITED has maintained this
ratio at a satisfactory level.

Page | 72
 (8) RETURN ON SHAREHOLDERS FUNDS=
NET PROFIT * 100
SHARE CAPITAL+RESERVES

Return on shareholders funds for the various years

obtained for the company as follow:

2012-13:4,433.8 * 100 =34%

13,170.5

2013-14:4,169.7* 100 = 30%

13,753

2014-15:6,489.3* 100 = 26%

25,305.5

It is of great practical importance to the prospective investors, as it enables

the profitability of a company to be compared with that of the other
company. It also indicates whether the return on proprietors funds is
enough in relation to the risks that they undertake. This ratio shows what
amount of dividend is likely to be received on shares. We can see that
LUPIN LIMITED return on shareholders funds is decreasing year by year
but its on the satisfactory level.

(9) PROPRIETARY RATIO =

PROPRIETORS FUNDS * 100
TOTAL ASSETS

Page | 73
 Proprietary ratio for the various years obtained for the
company as follow:

2012-13:13,170.5 * 100 =45%

29,524.6

2013-14:13,753* 100 = 41%

33,695.1

2014-15:25,305.5* 100 = 58%

43,706

The ratio shows the proportion of proprietors funds to the total assets
employed in the business. The higher the ratio the stronger the financial
position of the enterprise as it signifies that the proprietors have provided
larger funds to purchase the assets. We can see that LUPIN LIMITED
proprietary ratio shows the high fluctuations and it is maintained under
100% so its satisfactory but it should not be more than 100% because that
shows that company is insufficiently using the outside funds.

(10) DEBT-EQUITY RATIO =

LONG-TERM LIABILITIES * 100
OWNERS FUNDS

Debt equity ratio for the various years obtained for the
company as follow:

Page | 74
 2012-13:5,608.8 * 100 =43%
13,170.5

2013-14:5,651.2* 100 = 41%

13,753

2014-15:7,040 * 100 = 28%

25,305.5

This ratio is only another form of proprietary ratio and establishes

relationship between the outside long-term liabilities and owners funds. We
can see that LUPIN LIMITED debt equity ratio was higher in 2012-13&
2013-14 the higher the ratio means that outside creditors have a larger
claim than the owners of the business. By year 2014-15 the ratio has been
lower down to 28% that the good sign.

(11) DEBTORS RATIO =

DEBTORS + BILLS RECEIVABLE * 365
CREDIT SALES

Debtors ratio for the various years obtained for the

company as follow:

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 2012-13:6,322.6 * 365 =90 days
25,436.9

2013-14:7,090.6* 365 = 89 days

28,985.6

2014-15:9,165.9* 365 = 91 days

36,400.9

The ratio shows the number of days taken to collect the dues of credit
sales. It shows the efficiency or otherwise of the collection policy of the
enterprise.We can see that LUPIN LIMITED only entertains 90 days of
credit sales. In my point of view 90 days of credit sales is not a good sign.

(12) TOTAL ASSETS TURNOVER RATIO =

SALES
TOTAL ASSETS

Total assets turnover ratio for the various years

obtained for the company as follow:

2012-13:25,436.9 =0.86 times

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 29,524.6

2013-14:28,985.6 =0.86 times

33,695.1

2014-15:36,400.9 =0.83 times

43,706

The amount invested in business is invested in all assets jointly and sales
are affected through them to earn profits. The higher this ratio it shows that
with less amount of investment in total assets, the business has a capacity
to sell more and as such its profitability . We can see that LUPIN
LIMITED has maintained a satisfactory assets turnover ratio.

TREND PERCENTAGE LUPIN LTD

GROSS SALES(INR million)

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 GROSS SALES
60,000

50,000

40,000

30,000
47,678
20,000 38,238
27,730
10,000 17,503 20,717

EXPORTS (INR million)

30,000
26,405
25,000

19,654
20,000

AP I
15,000 FORMULATIONS

10,032
10,000
5,555 4,700
5,500 5,260 5,047 5,562
5,000 3,051

EARNINGS PER SHARE (BASIC)

(INR)

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 EPS
90
79.18
80
70
60.84
60
50.01 EPS
50
40 37.79
30
21.12
20
10
0

DIVIDEND %

DIVIDEND
160
140 135
125
120
100
100 DIVIDEND
80 65
60 50
40
20
0

EBIDTA (INR million)

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 EBIDTA
12,000
9,981
10,000

8,000 7,439
6,423 EBIDTA
6,000 4,913
4,000 2,977
2,000

PROFIT AFTER TAX (INR million)

PAT
8,000
7,000 6,816

6,000
5,015
5,000 PAT
4,083
4,000
3,086
3,000
2,000 1,730
1,000
0

PROFIT BEFORE TAX (INR million)

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 PBT
9,000 8,357
8,000
7,000
6,060
6,000 5,402
PBT
5,000
4,075
4,000
3,000 2,255
2,000
1,000
0

FINDINGS
This study is carried out with the objective of analyzing the financial
performance of LUPIN LIMITED to examine and understand the role of
finance in the growth of the company.

1. The comparative statement shows that the sales of the year 2010-
2011, 2012-2013 & 2014-2015 are rising high year by year.
2. The sales, PBIT, PBT, PAT all show the increasing trend in last
three years.
3. The net working capital and the gross working capital is increasing
year by year which gives a good sign that the company has
maintained a good working capital.
4. The Ideal current ratio is 2:1 LUPI LIMITED has maintained a
good balance between the current assets and current liabilities.

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 5. LUPIN LIMITED has maintained a satisfactory level of liquid
assets.
6. Net profit shows an increasing trend this shows that lupin has
maintained a good sales value and operating expenses.
7. The average collection period is not maintained by the company we
can see that their collection period is of 90 days which is not a good
sign the management should take care of it.
8. Lupins inventory management is well under control and they are
maintaining it in a stable manner.
9. Lupins exports are rising year by year which shows that they are
making impact on the world market.
10.They have done the smart acquisitions in Japan, Australia, Germany,
U.K, and France they have entered in the direct market through
acquisitions.

ON THE JOB TRAINING

What is SAP?

The name SAP is acronym for Systems, Applications and Products

in Data Processing. SAP is an extremely complicated system where
no one individual can understand all of it.

SAP runs on a fourth generation programming language called

Advance Business Application Programming (ABAP). It has many
of the features of other modern programming languages such as the
familiar C, Visual Basic, and Power Builder. Your programs name
conventions begins with a letter yxxx or zxxx.

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 SAP is an enterprise resource planning (ERP) software product
capable of integrating multiple business applications, with each
application representing a specific business area. These applications
update and process transactions in real time mode. It has the ability
to be configured to meets the needs of the business.

SAP are categorized into 3 core functional areas:

o Logistics

Sales and Distribution (SD)

Material Management (MM)

Warehouse Management (WM)

Production Planning (PP)

General Logistics (LO)

Quality Management (QM)

o Financial

Financial Accounting (FI)

Controlling (CO)

Enterprise Controlling (EC)

Investment Management (IM)

Treasury (TR)

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 o Human Resources

Personnel Administration (PA)

Personnel Development (PD)

SAP AT LUPIN
Lupin has installed the latest SAP system 6 which is connected to their
main server in Bombay. Lupins every department is connected with the
sap system which enables in fast working and less chances of fraud. The
good about sap is its works as an audit machine by which we can always
keep check on every transactions of the company. Ever transaction is
recorded as per their category of services. It is compulsory for every
vendor to mention their service tax number and the category of their
service on their bill. For some products service tax is not charged because
it is exempted from government. In lupin limited service tax is charged on
products of every plant except ETHAMBOUL plant & TARECV plant.
Some codes used in SAP as follows

DZ- no service tax

DC- service tax
Y6- no service tax
5G- TDS
5P- no TDS

Deduction for TDS

Contractor- sec 94c, 2%
Professional and technical services-10%
Plant and Machinery on lease-2%
Other than Plant and Machinery-10%
Commissions and broking-10%
Deduction for service tax

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 At present 10% service tax +2% cez (education) + 1%
secondary higher education cez.
Income more than 8, 00,000 the contractor has to pay service
tax.
VAT for suppliers
4% + 1% additional tax as per the nature of items(e.g.
gas=17%)
Excise duties are deducted on principal value.
PAN Number and SERVICE TAX Number is compulsory for
every suppliers and vendors.
Function performed under training
MIRO ENTRY
FB60
FB03
ML82
FBL5N
ZMFA003
FB02

RESEARCH METHODOLOGY

Two types of data have been used for this project study:-
1) Primary Data
2) Secondary Data

1) Primary Data:-
Those data, which are collected at the first hand either by the researcher or
by someone else for the purpose of study, are known as primary data.

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As in the case of everyday life, if we want to have first hand information of
any happening or event we either ask someone who know about it or we
observe it ourselves or we do both.

Basically, there are four methods of collecting primary data:-

A) Observational Method: -Observation is the basic method of

obtaining information about the world around us. Types of
observation are:
1) Casual Observation
2) Systematic Observation
3) Direct Observation.

B) Survey Method :-Survey can be done by either of the following

methods:
1) Personal Survey
2) Telephonic Survey
3) Mail Survey (Questionnaire).

C) Experimental Method
D) Panel Method

2) Secondary Data :-
Any data, which has been gathered earlier for some other purpose, are
secondary data. Secondary data is related to what has already happened in
the past period. Sometimes there is no possibility of gathering primary data
and hence during that time secondary data is available easily, quickly and

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cheaply. Secondary data provide information, which may not affect the
project under study directly.

The sources of secondary data are:

1) Libraries (Public and Private).

2) Literature
3) Governmental Publications (State and Central).
4) Trade associations.
5) Trade publications.
6) Newspaper, magazines, television and other media.
7) Business firm.

Secondary data for our project report are collected from various sources as
detailed below: -

1) Lupin Annual report

2) Internet
3) Website of the company.

Research type: -

My research work is basically an analytical type research. Which means

that I had been used the facts of information which are somewhat available
and analyze this information to make a critical evaluation.

Methods of collection of Data: -

The data is collected from the respected persons of the company by

communicating with many times. The communication was of non-
structural in nature so as to acquire variety of information from them.

Research Approach and Tools of Analysis:-

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For the analysis of the report and the study of the objectives I have used
many tools for analysis.

For the interpretation I have used different chart like Tables, Column
Chart, and Pie Chart.

The different tables and charts are used are easily understandable and
easily defined Analysis & Interpretation of Financial Statements under
various tools.

Page | 88
 CONCLUSION

Studying of the systems and procedure of a reputed company like

LupinPharma LTD was a rare opportunity available to me. I had interacted
with many officials of the company and I found them very cooperative and
informative. I had chosen to study Finance department at Lupin which was
once in a lifetime experience for me.

During these 5 weeks I have visited different departments and came to

know how they are working. What I have learned during 1 st year of MBA
was recalled by seeing the practical implementation of it in LupinPharma
LTD. This training has provided me with a great knowledge of how a
company can run efficiently.

The systems and procedures adopted by the company seem to be most

suited to its requirement and are full proof which is possible due to
professional management and adaptability to changing scenario. I also
firmly believe that with its continues professional approach, adaptability to
changing circumstances, the company will cross many milestones in the
near future.

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 BIBLIOGRAPHY

ANNUAL REPORTS:

1. Lupin ANNUAL REPORT (2013-14)

2. Lupin ANNUAL REPORT (2014-15)
3. Lupins SOP

WEBSITES:-

www.lupinworld.com

www.pharma.com

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