International Journal for Research in Engineering Application & Management (IJREAM)

ISSN : 2454-9150 Vol-04, Issue-06, Sep 2018

A Comparative Study on Working Capital Management of

Select Paint Companies in India
1
Merajud Din Drangay, 2Dr. N. Periyasami
1
Research Scholar, 2Associate Professor, Department of Commerce, Annamalai university, India.
1
merajdin333@gmail.com
Abstract - The study has been done to know the comparative position of paint companies namely, Asian paint
Company, Nerolac Paint Company and Shalimar Paint company. in working capital management by applying various
analyses such as component - wise analysis, ratio analysis by taking data from the year 2012-13 to 2016-17. The study
reveals that Asian Paint company has highest growth of net working capital during holding period followed by Nerolac
Paint company. Average Account Collection period is highest with Shalimar Paint company i.e. 110.64 days followed by
Nerolac Paint company46.31 days and the lowest Average collection period of Asian paint is 22.63 days. It is observed
that the lowest Account collection period is found in Asian paint company. A low collection period means prompt
collection and better management of receivables in Asian paint company than other two sample companies. The
highest Account collection period is found in Shalimar paint company. The longer collection period may negatively
affect the short-term debt paying ability of the business.

Key words: Working Capital, component wise analysis, Account payable and Account Collection.

I. INTRODUCTION
Working capital is the life blood and nerve system of any
business. Just as circulation of blood is essential in the
human body for maintaining life, working capital is also
essential to maintain the smooth running of the business.
Working capital refers to the excess of current assets over
current liabilities. Management of working capital
therefore, is concerned with the problems that arise in
attempting to manage the current assets, the current
liabilities and the inter-relationship that exists between
them.
The basic goal of working capital management is to manage
the current assets and current liabilities of a firm in such a
way that a satisfactory level of working capital is
maintained so that it is neither inadequate nor excessive.
This is so because both inadequate as well as excessive
working capital positions are bad for any business.
Inadequacy of working capital may lead the firm to
insolvency and excessive working capital implies idle funds
which earn no profit for the business. Working capital
management policies of a firm have a great effect on its
profitability, liquidity and structural health of the
organization.
II. OVER VIEW OF PAINT INDUSTRY
India is the second largest paint market in Asia with an
annual demand of over two million tonnes. The Indian paint
industry has been growing constantly over the last decade.
Growth has been constant with the GDP growth rate and in
various years even higher. Over the past few years, the
Indian paint market has extensively grown and caught the
attention of many international players. The country
continues to have a healthy growth rate compared to other
economies, backed by the increasing level of disposable
income, and demand from infrastructure, industrial and
automotive sectors. On the back of such advocacy, it is
anticipated that the sector post a CAGR (Compound
Annual Growth Rate) of around 15 per cent during 2012 to
2015,
The Indian Paint Industry posted a CAGR of around 16.2
percent during 2013-14 to 2015-16 in India. The emergence
of the middle class in India, growing infrastructure,
increase in the tendency to spend and growing young
population inclined towards lavish lifestyle are the reasons
that spurred the Indian paint industry to new heights. In
Financial year 2015, the paint industry stood at Rs 40,600
crore with per capita consumption increasing to over 4 kgs,
out of which the decorative segment contributed nearly 73
per cent at Rs 29,638 crore, while the remaining Rs 10,962
crore was contributed by the industrial segment.
Objectives of the study
Following are the Objectives of the present Study.
1. To study the management of working capital
components of select paint companies
2. To study the structure of the working capital
of select paint companies. .
III. METHODOLOGY OF THE STUDY
The research methodology is one of the significant concepts
in any research study. To compare the key working capital

299 | IJREAMV04I0642070 DOI : 10.18231/2454-9150.2018.0733 © 2018, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-04, Issue-06, Sep 2018

components and ratios of selected companies, the 2. Ratio analysis

exploratory and analytical research design is used for their
Information found in published financial statements is often
calculation. The sample select paint companies for this
not enough to form conclusive judgments about company’s
study are Asian Paint Company, Nerolac Paint Company
performance, financial statements to provide important
and Shalimar Paint Company. This study is totally based on
clues about what needs to be examined in greater detail.
the secondary data which have been collected from
Analysis of financial statements is of interest to lenders,
different sources like newspapers, journals, articles and
investors, security analysts, managers, regulators and
annual reports of the companies etc. The study is done on
others. Financial statement analysis may be done through
basis of data for the period of 5 years from the financial
various techniques like horizontal analysis, vertical analysis
year 2012-13 to 2016-17.
etc. but ratio analysis is a widely used tool for analysis. It
IV. DATA ANALYSIS AND INTERPRETATION enables the stakeholders to mark trends in a business and to
compare its performance with competitors. This research
The analysis of working capital management of select paint uses a ratio analysis to examine working capital position
companies is arranged in the following parts: and management of paint companies in India.
1. Component - wise analysis of Working Capital
Table – 1 Component Wise Analysis of Working Capital of Asian Paint Company from 2012-13 to 2016-17
Total
Cash
Sundr Other Loans Current Net
% of Curre % of % of and % of % of % of
Yea Invento y Curre and Total Liabiliti Worki
GW nt GW GW Bank GW GW GW
r ry Debto nt Advanc GWC es & ng
C Invest. C C Balan C C C
rs Assets es Provisio Capital
ce
ns
2012 1480.79 48.6 90 2.95 633.88 20.8 566.86 18.6 105.26 3.46 164.08 5.39 3040.8 2358.66 682.21
-13 9 4 4 7
2013 1665.05 43.3 943.96 24.5 712.36 18.5 104.12 2.71 176.1 4.58 239.7 6.24 3841.2 2835.12 1006.17
-14 4 7 4 0 9
2014 1802.18 43.2 1118.0 26.8 728.87 17.4 61.81 1.48 252.92 6.06 205.43 4.92 4169.2 2757.82 1411.45
-15 2 6 1 8 7
2015 1610.12 35.4 1477 32.5 759.06 16.7 160.78 3.54 525.15 11.5 9.65 0.21 4541.7 2455.06 2086.7
-16 5 2 1 6 6
2016 2194.09 40.4 1315.4 24.2 994.63 18.3 205.27 3.78 706.94 13.0 13.55 0.24 5429.8 2875.73 2554.15
-17 0 2 1 1 8
Mea 1750.44 42.2 988.88 22.2 765.76 18.3 219.76 6.03 353.27 7.73 126.48 3.40 4204.6 2656.47 1548.13
n 2 1 8 1
S.D 273.49 4.83 541.19 2.95 136.04 1.55 201.54 7.10 253.76 4.28 108.24 2.93 880.69 234.26 768.82
₹ In Crores
Source: Computed from the Annual Reports of Asian paint
Interpretation
Table 1 shows components Analysis of working capital of Asian Paint Company from 2012-13 to 2016-17. It is observed that
the Inventory holds major portion in total current assets. On an average, Inventory holds 42.22 percent in total current assets
whereas, current Investments holds 22.21 percent, Sundry Debtors & cash and bank balance hold 18.38 percent & 6.03 percent
portion of total current assets respectively. Loans & advances and other current assets hold 3.40 percent and 7.73percent
respectively. The average Total Current assets of Asian paint company from 2012-13 to 2016-17 was ₹ 4204.61, whereas
average current liabilities was ₹ 2656.47. The average net working capital of Asian paint company is ₹ 1548.13 and the SD is
768.82.
Table – 2 Component Wise Analysis of Working Capital of Nerolac Paint Company from 2012-13 to 2016-17
₹ In Crores
Total
Cash
Sundr Other Loans Current Net
% of Curre % of % of and % of % of % of
Yea Invento y Curre and Total Liabiliti Worki
GW nt GW GW Bank GW GW GW
r ry Debto nt Advanc GWC es & ng
C Invest. C C Balan C C C
rs Assets es Provisio Capital
ce
ns
2012 534.07 49.8 12.04 1.12 419.98 39.1 60.06 5.6 26 2.42 19.29 1.8 1071.4 634.17 437.27
-13 4 9 4
2013 645.66 52.7 23.37 1.9 454.83 37.1 54.88 4.48 18.47 1.5 26.93 2.19 1224.1 685.58 538.56
-14 4 5 4

300 | IJREAMV04I0642070 DOI : 10.18231/2454-9150.2018.0733 © 2018, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-04, Issue-06, Sep 2018

2014 541.67 41.8 182.48 14.0 496.34 38.3 34.05 2.63 20.07 1.55 19.97 1.54 1294.5 604.4 690.18
-15 4 9 3 2 8
2015 571.71 26.9 535.56 25.2 524.62 24.7 477.89 22.5 3.88 0.18 6.38 0.3 2120.0 662.69 1457.35
-16 6 6 4 4 4
2016 691.31 30.2 530.75 23.1 571.71 24.9 475.87 20.7 12.57 0.54 6.66 0.29 2288.8 687.39 1601.48
-17 8 7 9 7
Mea 596.88 40.3 256.84 13.1 493.49 32.8 220.55 11.2 16.19 1.24 15.846 1.22 1599.8 654.84 944.96
n 2 1 8 1 1
S.D 68.78 11.4 261.09 11.3 59.14 7.35 234.19 9.62 8.38 0.89 9.02 0.88 561 35.48 543.45
8 9
Source: Computed from the Annual Reports of Nerolac Paint
Table 2 shows component wise Analysis of working capital of Nerolac Paint Company from 2012-13 to 2016-17. It is
observed that the Inventory holds major portion in total current assets. On an average, Inventory holds 40.32 percent in total
current assets whereas, current Investments holds 13.11 percent, Sundry Debtors & cash and bank balance hold 32.88 percent
& 11.21 percent portion of total current assets respectively. Loans & advances and other current assets hold 1.22 percent and
1.24 percent respectively. The average Total Current assets of Nerolac paint company from 2012-13 to 2016-17 was ₹
1599.81, whereas average current liabilities is ₹ 654.84. The average net working capital of Nerolac paint company is ₹
944.96 and the SD is 543.45. So after the components wise analysis of currents assets it is observed that that the net working
capital is shown as increasing trend.
Table – 3 Components Wise Analysis of Working Capital of Nerolac Paint Company from 2012-13 to 2016-17
₹ In Crores
Total
Cash
Other Loans Current Net
% of Sundry % of and % of % of % of Total
Year Inventory Current and Liabilities Working
GWC Debtors GWC Bank GWC GWC GWC GWC
Assets Advances & Capital
Balance
Provisions

2012-13 131.96 40.62 154.47 47.55 15.15 4.66 11.32 3.48 11.95 3.67 324.85 274.55 50.3

2013-14 121.35 36.82 159.66 48.44 4.46 1.35 30.78 9.34 13.3 4.03 329.55 284.6 44.95

2014-15 105.97 35.3 153.62 51.18 0.93 0.3 30.5 10.16 9.12 3.03 300.14 294.19 5.95

2015-16 110.92 36.32 143.24 46.91 8.96 2.93 32.62 10.68 9.61 3.14 305.35 283.22 22.13

2016-17 92.55 31.97 124.69 43.07 11.94 4.12 50.93 17.59 6.5 2.24 289.46 297.15 -7.69

Mean 112.55 36.21 147.13 47.43 8.288 2.67 31.23 10.25 10 3.22 309.87 286.74 23.12

S.D 15 3.1 13.88 2.93 5.69 1.83 14.02 5.01 2.63 0.68 16.9 9.07 24.8

Source: Computed from the Annual Reports of Shalimar Paint.

In table 3 of component wise analysis of Shalimar paint company, it is observed that the Sundry Debtors holds major portion in
total current assets. On an average, sundry debtors holds 47.43 percent in total current assets whereas current inventory holds
36.21 percent, cash and bank balance hold 2.67 percent portion of total current assets respectively. Loans & advances and other
current assets hold 3.22 percent and 10.25 percent respectively. The average Total Current assets of Shalimar paint company
from 2012-13 to 2016-17 was ₹ 309.87, whereas average current liabilities was ₹ 286.74. The average net working capital of
Shalimar paint company is 23.12 and the SD is 24.8. So the component wise analysis of currents assets we observe that the net
working capital is shows decreasing trend as in the first year of study period it is₹50.30 crores but at the end of the 2016-17 it
is -7.69 .
Table – 4 Average Growth of Working Capital Components during Holding Period from 2013 to 2017
Asian Paint Nerolac Paint Shalimar Paint
Components (%) (%) (%)

Inventories 12.68 9.80 -1.58

Current Investments 184.53 175.23 -
Trade Receivable 15.32 9.83 -1.69
Cash and Bank Balance 15.74 251.60 152.27
Loans and Advances 52.73 0.16 71.12
Other Current Assets 8.03 32.25 13.94
Total Current Assets 14.99 18.90 2.04
Current Liabilities 13.31 0.20 6.37

301 | IJREAMV04I0642070 DOI : 10.18231/2454-9150.2018.0733 © 2018, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
ISSN : 2454-9150 Vol-04, Issue-06, Sep 2018

Provisions -3.65 2.28 -44.39

Total Current Liabilities 7.12 6.19 5.52
Net Working Capital 33.69 31.29 14.31
Source: Computed from the Annual Reports of (i) AP – Asian Paint (ii) NP – Nerolac Paint (iii) SP – Shalimar Paint.
From table – 4 of Average Growth Rate of Working Capital Components of select paint companies during the period from
2012-13 to 2016-17, it is observed that the Asian paint has highest growth of NWC during holding period followed by Nerolac
Paint Company and the low net working capital is with Shalimar paint company of 14.31 percent. Average growth rate of
current liabilities is highest with Asian paint company which is 13.31 percent followed by Shalimar paint company of 6.37
percent. The Average Growth Rate of inventories is more in Asian paint company by 12.68 percent followed by Nerolac paint
company by 9.80 percent, but it is negative in Shalimar paint company by -1.58 percent.

Table – 5 Working Capital Ratio Analysis of Asian Paint Company from 2013 to 2017
Ratios 2012-13 2013-14 2014-15 2015- 2016- Mean SD CAGR CV
16 17 % %
Current Assets to Total Assets Ratio 0.53 0.57 0.57 0.52 0.53 0.54 0.02 - 4.42
Account Receivable Turnover Ratio 15.73 16.19 17.65 17.3 14.23 16.22 1.36 -1.98 8.39
Average Collection Period (Days) 23.2 22.54 20.67 21.09 25.65 22.63 1.97 2 8.74
Account Payable Turnover Ratio 4.24 3.90 4.68 4.39 4.06 4.25 0.30 -1 7.08
Average Payable Period (Days) 86.08 93.58 77.99 83.14 89.9 86.13 6.01 1 6.98
Source: Computed from the Annual Reports of Asian Paint
Table 5 reveals the working capital analyses of Asian paint company from the year 2012-13 to 2016-17. In this table it is
observed that the average current assets to total assets ratio of Asian paint company is 0.54 during the study period. The
highest current assets to total assets ratio is 0.57 in the year 2013-14 & 2014-15 and the lowest is 0.52 in 2015-16. The
Average Account Receivable Turnover Ratio is 16.22 and the co-efficient of Variation is 8.39 percent. The highest Account
Receivable Turnover ratio is 17.65 in the year 2014-15 and lowest is 14.23 in 2016-17. Average collection Period shows
fluctuating trend during study period and it is highest by 25.65 days in the year 2016-17 and lowest by 20.67 days in the year
2014-15. The mean value of Account Payable Turnover Ratio is 4.25 and the SD is 0.30 percent with the CAGR of -1.
Average Payable Period also shows fluctuating trend and it remains on an average 86.13 days in last five years. The highest
Payable Period is 93.58 days in 2013-14 and lowest is 77.99 days in 2014-15.
Table – 6 Working Capital Ratio Analysis of Nerolac Paint Company from 2013 to 2017
Ratios 2012- 2013- 2014- 2015-16 2016- Mean SD CAGR CV
13 14 15 17 % %
Current Assets to Total Assets Ratio 0.51 0.54 0.55 0.67 0.65 0.58 0.07 4.97 12.20
Account Receivable Turnover Ratio 7.62 7.80 8.03 8.07 7.90 7.88 0.18 0.72 2.31
Average Collection Period (Days) 47.46 46.79 45.45 45.22 46.2 46.31 1.08 -1 2.34
Account Payable Turnover Ratio 4.92 4.78 6.45 4.04 4.12 4.86 0.96 -3 19.93
Average Payable Period (Days) 74.18 76.35 56.58 90.34 88.59 77.20 13.57 4 17.58
Source: Computed from the Annual Reports Nerolac Paint Company.
Table 6 shows the working capital analyses of Nerolac paint company from the year 2012-13 to 2016-17. This table depicts
that the average current assets to total assets ratio of Nerolac paint company is 0.58 during the study period. The highest
current assets to total assets ratio is 0.67 in the year 2015-16 and the lowest is 0.51 in 2012-13. The Average Account
Receivable Turnover Ratio is 7.88 and the co-efficient of Variation is 2.31 percent. The highest Account Receivable Turnover
ratio is 8.03 in the year 2014-15 and lowest is 7.90 in 2016-17. The Average collection Period shows fluctuating trend during
study period and it is highest is 47.46 days in the year 2013-14 and lowest is 45.22 days in the year 2015-16. The mean value
of Account Payable Turnover Ratio is 4.86 and the SD is 0.96 percent with the CAGR of -3. Average Payable Period also
shows fluctuating trend and it remains on an average 77.20 days in last five years. The highest Payable Period is 90.34 days in
2015-16 and lowest is 56.58 days in 2014-15.
Table – 7 WORKING CAPITAL RATIO ANALYSIS OF SHALIMAR PAINT COMPANY
Ratios 2012-13 2013-14 2014-15 2015-16 2016-17 Mean SD CAGR CV
% %
Current Assets to Total Assets Ratio 0.88 0.86 0.78 0.78 0.74 0.80 0.05 -3.41 7.34
Account Receivable Turnover Ratio 3.62 3.35 3.13 3.14 3.30 3.30 0.19 -1.83 6.02
Average Collection Period 100.82 108.95 116.61 116.24 110.60 110.64 6.44 2 5.82
Account Payable Turnover Ratio 2.23 2.17 1.89 1.70 1.45 1.88 0.32 -8 17.23
Average Payable Period 163.67 168.2 193.12 214.7 251.72 198.28 36.24 9 18.27
Source: Computed from the Annual Reports Shalimar Paint Company.

302 | IJREAMV04I0642070 DOI : 10.18231/2454-9150.2018.0733 © 2018, IJREAM All Rights Reserved.

 International Journal for Research in Engineering Application & Management (IJREAM)
Table 7 shows the working capital analyses of Shalimar
paint company from the year 2012-13 to 2016-17. In this
table it is observed that the average current assets to total
assets ratio of Shalimar paint company is 0.80 during the
study period. The highest current assets to total assets ratio
is 0.88 in the year 2012-13 and the lowest is 0.74 in 2012-
13. The Average Account Receivable Turnover Ratio is
3.30 and the co-efficient of Variation is 6.02 percent. The
highest Account Receivable Turnover ratio is 3.62 in the
year 2012-13 and lowest is 3.13 in 2014-15. The Average
collection Period shows fluctuating trend during study
period and the highest is 116.6 days in the year 2014-15
and lowest is 100.82 days in the year 2012-13. The mean
value of Account Payable Turnover Ratio is 1.88 and the
SD is 0.32 percent with the CAGR of -8. Average Payable
Period also shows fluctuating trend and it remains on an
average 198.28 days in last five years. The highest Payable
Period is 251.72 days in 2016-17 and lowest is 163.67 days
in 2012-13.
V. FINDINGS
1. The average annual growth rate of Inventory of the
Asian paint is 12.68 percent that is the highest
compared to other companies, whereas negative
inventory is with the Shalimar paint company.
2. Trade Receivable annual growth rate of the Asian paint
company has 15.32 percent is highest which shows
more effective in the management of debtors, but
negative is with Shalimar paint company.
3. The average of net working capital of Asian paint
company is 33.69 percent which is highest as
compared to the other companies, whereas it is lowest
to Shalimar paint company as 14.31 percent.
4. The Mean of Account collection period is highest in
Shalimar paint company which is 110 days and the
lowest is with the Asian paint company of 22.63 days.
5. The Average of account payable period of Shalimar
paint company is 198.28 days that is highest as
compared to other companies, while the Nerolac paint
company has 86.13 days.
VI. SUGGESTIONS
1. The Annual Growth Rate of Shalimar Paint Company
is negative, so they have to concentrate on the sales
strategies by implementing the various marketing
activities that leads to increase the profit.
2. Net working Capital of Shalimar paint company is low
as compared to other two companies which means
company’s current liabilities exceeds its current assets
that may affect the growth of the company. So they
have to work on current assets over current liabilities to
improve its net working position much better.
3. Shalimar paint company needs to lower average
collection period. However average collection period
of Asian Paint company was very less. It may have
303 | IJREAMV04I0642070 DOI : 10.18231/2454-9150.2018.0733
ISSN : 2454-9150 Vol-04, Issue-06, Sep 2018
negative impact on credit sales. Therefore proper care
should be taken for collection policy.
VII. CONCLUSION
Decision relating to working management involves
managing the relationship between a firms short term assets
and its short term liabilities. The goal of working capital
management is to ensure that the firm is able to continue its
operations and that it has sufficient cash flow to satisfy both
maturing short term debt and upcoming operation expenses.
Relating to the study of the comparative working capital
management of different paint companies, the net working
capital is good with Asian Paint Company and Nerolac
Paint Company but low in Shalimar Paint Company as
compared to other sample companies that indicate that
company has a obstacle in day to day operation. So the
Shalimar paint company should improve their net working
capital .The overall study shows that working capital
management is satisfactory.
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