chapter: 8 financing of working...

173

CHAPTER: 8

FINANCING OF WORKING CAPITAL

Financing of working capital requirement is an important point of consideration in the

management of working capital. As far as fixed assets are concerned, there is no problem

in financing, as these are financed through long-term resources. In case of financing of

working capital, it is not so easy, because it is financed out of both short term and long

term funds. It is very complicated to decide about the combination of short term and long-

term funds for financing the working capital. Utilization of short term funds is suggested

on the basic premise that these are less expensive than the long term funds, and their

utilization will have a constructive impact on productivity. Use of long term funds is

preferred on the justification that they provide liquidity for a longer period of time. For the

purpose of study of financing of working capital, components of short term sources have

been converted into percentage.

8.1 INDIAN FARMERS FERTILIZER COOPERATIVE LIMITED (Table No. 8.1)

Short Term Bank Borrowings/Loans shows an increase from 57.45% in 1999-2K to

59.78% in 2000-01 and alternate decrease/increase from 55.69% in 2001-02 to 75.54% in

2005-06. Alternate increase/decrease took place from 81.67% in 2006-07 to 79.87% in

2008-09. These averages at 63.90% and varies at a rate of 24%.

Creditors show an alternate decrease/increase from 35.45% in 1999-2K to 39.21% in

2001-02, from 41.50% in 2002-03 to 21.77% in 2005-06 and from 14.63% in 2006-07 to

17.41% in 2008-09. These averages at 31.51% and varies at 46%.

Others Sources shows an increase from 7.10% in 1999-2K to 7.55% in 2000-2001 and

continuous decrease from 5.11% in 2001-02 to 3.78% in 2003-04. Alternate

increase/decrease took place from 5.59% in 2004-05 to 3.70% in 2006-07 and finally

174

decreases from 3.77% in 2007-08 to 2.72% in 2008-09. These averages at 4.58% and

varies at 37%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.1IFFCO

STBB/L Creditors Others

Year(% of total S T finance)

(% of total S T finance)


1999-2K 57.45 35.45 7.102000-01 59.78 32.67 7.552001-02 55.69 39.21 5.112002-03 54.66 41.50 3.842003-04 55.51 40.71 3.782004-05 36.01 58.41 5.592005-06 75.54 21.77 2.702006-07 81.67 14.63 3.702007-08 82.85 13.38 3.772008-09 79.87 17.41 2.72Mean 63.90 31.51 4.58S.D. 15.37 14.49 1.70C.V. 0.24 0.46 0.37

(Source: Annual Reports 1999-2009)

0102030405060708090

Perc

enta

ge (%

)

Years

Financing of Working Capital - IFFCO

STBB/L (% of total ST finance)Creditors (% of total ST finance)Others (% of total ST Finance)

Fig No. 8.1

8.2 KRISHAK BHARTI COOPERATIVE LIMITED (Table No. 8.2)

Short Term Bank Borrowings/Loans shows that company under study has not used such

type of source to finance working capital

Creditors show an increase from 47.42% in 1999-2K to 68.86% in 2000-01 and

continuous decrease from 56.73% in 2001-02 to 48.42% in 2003-04. Alternate

increase/decrease took place from 59.56% in 2004-05 to 54.98% in 2007-08 and finally

decreases to 36.62% in 2008-09. These averages at 54.57% and varies at 17%.

Others Sources shows an alternate decrease/increase from 52.58% in 1999-2K to 43.27%

175

in 2001-02 and increase/decrease from 47.37% in 2002-03 to 45.02% in 2007-08. Finally

increase took place to 63.38% in 2008-09. These averages at 45.43% and varies at 20%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.2KRIBHCO





1999-2K 0.00 47.42 52.582000-01 0.00 68.86 31.142001-02 0.00 56.73 43.272002-03 0.00 52.63 47.372003-04 0.00 48.42 51.582004-05 0.00 59.56 40.442005-06 0.00 56.91 43.092006-07 0.00 63.54 36.462007-08 0.00 54.98 45.022008-09 0.00 36.62 63.38Mean 0.00 54.57 45.43S.D. 0.00 9.04 9.04C.V. 0.00 0.17 0.20


Fig No. 8.2

8.3 COOPERATIVE SECTOR (Table No. 8.3)

Short Term Bank Borrowings/Loans shows an alternate increase/decrease from 48.92%

in 1999-2K to 52.51% in 2001-02 continuous decrease from 51.20% in 2002-03 to 33.29%

in 2004-05. Continuous increase took place from 73.22% in 2005-06 to 79.12% in 2007-08

finally decreases to 78.21% in 2008-09. These averages at 60.10% and varies at 27%.


2001-02, from 42.20% in 2002-03 to 22.85% in 2005-06 and from 16.26% in 2005-06 to


176

Others Sources shows a continuous decrease from 13.86% in 1999-2K to 6.60% in 2002-

03 and alternate increase/decrease from 7.65% in 2003-04 to 4.79% in 2006-07. Decrease

took place from 5.62% in 2007-08 to 3.98% in 2008-09. These averages at 7.15% and

varies at 42%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.3COOP SECTOR





1999-2K 48.92 37.23 13.862000-01 54.55 35.84 9.612001-02 52.51 40.21 7.292002-03 51.20 42.20 6.602003-04 51.02 41.33 7.652004-05 33.29 58.49 8.222005-06 73.22 22.85 3.932006-07 78.95 16.26 4.792007-08 79.12 15.25 5.622008-09 78.21 17.81 3.98Mean 60.10 32.75 7.15S.D. 16.02 14.18 3.00C.V. 0.27 0.43 0.42


Fig No. 8.3

8.4 FERTILIZERS AND CHEMICALS TRAVANCORE LIMITED (Table No. 8.4)

Short Term Bank Borrowings/Loans shows a decrease from 47.05% in 1999-2K to

44.15% in 2000-01 and continuous increase from 25.83% in 2001-02 to 51.65% in 2004-

05. Again continuous increase took place from 37.50% in 2005-06 to 55.32% in 2008-09.

These averages at 42.40% and varies at 23%.

Creditors show a continuous increase from 38.06% in 1999-2K to 50.37% in 2001-02 and

177

decrease from 38.26% in 2002-03 to 29.36% in 2004-05. Again continuous decrease took

place from 39.93% in 2005-06 to11.25% in 2008-09. These averages at 33.62% and varies

at 33%.

Others Sources shows a continuous increase from 14.90% in 1999-2K to 30.87% in 2002-

03 and alternate decrease/increase from 29.09% in 2003-04 to 28.89% in 2007-08. Finally

increase took place to 33.43% in 2008-09. These averages at 23.98% and varies at 26%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.4FACT





1999-2K 47.05 38.06 14.902000-01 44.15 38.66 17.192001-02 25.83 50.37 23.802002-03 30.87 38.26 30.872003-04 34.42 36.49 29.092004-05 51.65 29.36 18.992005-06 37.50 39.93 22.572006-07 44.97 34.93 20.102007-08 52.25 18.86 28.892008-09 55.32 11.25 33.43Mean 42.40 33.62 23.98S.D. 9.87 11.22 6.30C.V. 0.23 0.33 0.26


Fig No. 8.4

8.5 MADRAS FERTILIZERS LIMITED (Table No. 8.5)

Short Term Bank Borrowings/Loans shows continuous decrease from 67.37% in 1999-

2K to 19.58% in 2001-02 and increase from 26.15% in 2002-03 to 37.23% in 2004-05.

Again continuous increase took place from 29.93% in 2005-06 to 39.07% in 2008-09.

178


Creditors show an increase from 15.87% in 1999-2K to 71.74% in 2001-02 and

continuous decrease from 64.48% in 2002-03 to 48.47% in 2005-06. Again continuous

decrease took place from 50.60% in 2006-07 to 49.86% in 2008-09. These averages at

52.77% and varies at 29%.

Others Sources shows an alternate decrease/increase from16.76% in 1999-2K and 8.68%

in 2001-02 and continuous increase/increase from 9.37% in 2002-03 to 16.99% in 2006-

07. Increase took place from 9.44% in 2007-08 to 11.08% in 2008-09. . These averages at

12.74% and varies at 36%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.5MFL





1999-2K 67.37 15.87 16.762000-01 25.64 66.90 7.462001-02 19.58 71.74 8.682002-03 26.15 64.48 9.372003-04 30.90 54.71 14.382004-05 37.23 51.16 11.602005-06 29.93 48.47 21.602006-07 32.40 50.60 16.992007-08 36.66 53.90 9.442008-09 39.07 49.86 11.08Mean 34.49 52.77 12.74S.D. 16.69 15.27 4.55C.V. 0.48 0.29 0.36


Fig No. 8.5

179

8.6 NATIONAL FERTILIZERS LIMITED (Table No. 8.6)

Short Term Bank Borrowings/Loans shows continuous increase from 39.89% in 1999-

2K to 68.36% in 2003-04 and from 10.57% in 2004-05 to 44.76% in 2007-08.Finally

decreases to 19.86% in 2008-09. This average at 42.15% and varies at 44%.

Creditors show continuous decrease from 49.88% in 1999-2K to 24.05% in 2003-04 and

from 77.73% in 2004-05 to 49.47% in 2007-08 and finally increases to 72.75% in 2008-09.


Others Sources shows continuous decrease from 10.23% in 1999-2K to 6.02% in 2002-03

and alternate increase/decrease from 7.58% in 2003-04 to 7.81% in 2005-06. Alternate

decrease/increase took place from 7.21% in 2006-07 to 7.39% in 2008-09. These averages

at 7.90% and varies at 23%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.6NFL





1999-2K 39.89 49.88 10.232000-01 43.92 47.84 8.242001-02 57.92 35.08 7.002002-03 65.96 28.02 6.022003-04 68.36 24.05 7.582004-05 10.57 77.73 11.712005-06 33.01 59.18 7.812006-07 37.27 55.52 7.212007-08 44.76 49.47 5.772008-09 19.86 72.75 7.39Mean 42.15 49.95 7.90S.D. 18.62 17.59 1.82C.V. 0.44 0.35 0.23


Fig No. 8.6

180

8.7 RASHTRIYA CHEMICALS & FERTILIZERS LIMITED (Table No. 8.7)

Short Term Bank Borrowings/Loans shows continuous rise from 60.73% in 1999-2K to

68.34% in 2001-02 and alternate decrease/increase from 51.34% in 2002-03 to 34.28% in

2005-06. Alternate increase/decrease took place from 11.54% in 2006-07 to 0.09% in

2008-09. These averages at 43.42% and varies at 56%.

Creditors shows an alternate decrease/increase from 23.15% in 1999-2K to 18.06% in

2001-02 and continuous decrease from 26.61% in 2002-03 to 20.21% in 2004-05.

Alternate increase/decrease took place from 43.05% in 2005-06 to 76.97% in 2008-09.


Others Sources shows an alternate increase/decrease from 16.11% in 1999-2K to 22.05%

in 2002-03 continuous decrease from 48.72% in 2003-04 to 22.66% in 2005-06. Alternate

decrease/increase took place from 25.64% in 2006-07 to 22.93% in 2008-09. These

averages at 23.74% and varies at 49%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.7RCF





1999-2K 60.73 23.15 16.112000-01 65.29 17.02 17.692001-02 68.34 18.06 13.612002-03 51.34 26.61 22.052003-04 29.22 22.06 48.722004-05 42.18 20.21 37.612005-06 34.28 43.05 22.662006-07 11.54 62.82 25.642007-08 71.22 18.45 10.332008-09 0.09 76.97 22.93Mean 43.42 32.84 23.74S.D. 24.53 21.17 11.56C.V. 0.56 0.64 0.49


181

Fig No. 8.7

8.8 PUBLIC SECTOR (Table No. 8.8)

Short Term Bank Borrowings/Loans shows an alternate decrease/increase from 50.14%

in 1999-2K to 46.17% in 2002-03 and continuous decrease from 44.40% in 2003-04 to

33.65% in 2005-06. Alternate increase/decrease took place from 34.57% in 2006-07 to


Creditors show an alternate increase/decrease from 36.29% in 1999-2K to 41.56% in

2001-02 and alternate decrease/increase from 39.64% in 2002-03 to 45.93% in 2004-05.

Again alternate increase/decrease took place from 47.07% in 2005-06 to 34.41% in 2007-

08 and finally increases to 58.20% in 2008-09. These averages at 43.28% and varies at

17%.

Others Sources shows decrease from 13.56% % in 1999-2K to 11.61% in 2001-02 and

alternate increase/decrease from 14.19% in 2002-03 to 18.93% in 2004-05. Continuous

decrease took place from 18.28% in 2005-06 to 11.40% in 2007-08 and finally increases to


182

FINANCING OF WORKING CAPITAL-TABLE NO. 8.8PUBLIC SECTOR





1999-2K 50.14 36.29 13.562000-01 44.41 43.98 11.612001-02 46.83 41.56 11.612002-03 46.17 39.64 14.192003-04 44.40 34.94 20.662004-05 35.14 45.93 18.932005-06 33.65 48.07 18.282006-07 34.57 49.73 15.702007-08 54.19 34.41 11.402008-09 21.92 58.20 19.87Mean 41.14 43.28 15.58S.D. 9.63 7.51 3.62C.V. 0.23 0.17 0.23


Fig No. 8.8

8.9 CHAMBAL FERTILIZERS AND CHEMICALS LIMITED (Table No. 8.9)

Short Term Bank Borrowings/Loans shows continuous increase from 7.65% in 1999-2K

to 67.25% in 2002-03 and alternate decrease/increase from 62.87% in 2003-04 to 36.94%

in 2005-06. Alternate increase/decrease took place from 66.37% in 2006-07 to 19.62% in



alternate increase/decrease from 31.91% in 2003-04 to 52.66% in 2005-06. Alternate

decrease/increase took place from 23.50% in 2006-07 to 77.01% 2008-09. These averages

at 52.21% and varies at 5%.

Others Sources shows continuous increased from 7.83% in 1999-2K to 10.19% in 2001-

183

02 and from 4.02% in 2002-03 to 10.40% in 2005-06. Decrease took place from 10.13% in

2006-07 to 3.37% in 2008-09. These averages at 7.58% and varies at 34%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.9CFL





1999-2K 7.65 84.52 7.832000-01 14.60 77.52 7.882001-02 32.56 57.25 10.192002-03 67.25 28.72 4.022003-04 62.87 31.91 5.222004-05 25.93 65.64 8.432005-06 36.94 52.66 10.402006-07 66.37 23.50 10.132007-08 68.26 23.38 8.362008-09 19.62 77.01 3.37Mean 40.21 52.21 7.58S.D. 23.87 2.55 2.55C.V. 0.59 0.05 0.34


Fig No. 8.9

8.10 GUJARAT NARMDA VALLEY FERTILIZER COMPANY LIMITED (Table

No. 8.10)


in 1999-2K to 13.81% in 2001-02 and from 35.18% in 2002-03 to 46.10% in 2005-06.

Alternate increase/decrease took place from 43.79% in 2006-07 to 31.78% in 2008-09.


Creditors show an alternate increase/decrease from 58.19% in 1999-2K to 82.05% in

2001-02 and from 62.69% in 2002-03 to 47.66% in 2005-06. Alternate decrease/increase

184

took place from 51.63% in 2006-07 to 52.88% in 2008-09. These averaged sat 58.70% and

varies at 26%.


and increase from 2.31% in 2003-04 to 6.24% in 2005-06. Again continuous increase took

place from 4.57% in 2006-07 to 15.34% in 2008-09. These averages at 5.79% and varies at

63%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.10GNVFC





1999-2K 35.50 58.19 6.322000-01 11.20 83.23 5.572001-02 13.81 82.05 4.142002-03 35.18 62.69 2.132003-04 30.34 67.35 2.312004-05 59.68 34.73 5.602005-06 46.10 47.66 6.242006-07 43.79 51.63 4.572007-08 47.68 46.59 5.732008-09 31.78 52.88 15.34Mean 35.51 58.70 5.79S.D. 14.96 15.51 3.68C.V. 0.42 0.26 0.63


Fig No. 8.10

8.11 GUJARAT STATE FERTILIZER COMPANY LIMITED (Table No. 8.11)


in 1999-2K to 41.99% in 2002-03 and decrease/increase from 43.60% in 2003-04 to

45.10% in 2006-07. Decrease took place from 34.93% in 2007-08 to 25.06% in 2008-09.

185



2001-02 and from. 52.43% in 2002-03 to 46.41% in 2006-07. Increase took place from

56.82% in 2007-08 to 67.59% in 2008-09. These averages at 53.61% and varies at 12%.


and alternate decrease/increase from 8.06% in 2004-05 to 8.25% in 2007-08 and finally

decreases to 7.36% in 2008-09. These averages at 6.74% and varies at 20%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.11GSFC





1999-2K 40.77 52.18 7.052000-01 42.33 51.12 6.562001-02 41.97 51.67 6.352002-03 41.99 52.43 5.582003-04 43.60 51.67 4.732004-05 30.81 61.13 8.062005-06 49.98 45.08 4.942006-07 45.10 46.41 8.492007-08 34.93 56.82 8.252008-09 25.06 67.59 7.36Mean 39.65 53.61 6.74S.D. 7.34 6.70 1.35C.V. 0.19 0.12 0.20


Fig No. 8.11

8.12 NAGARJUNA FERTILIZERS & CHEMICALS LIMITED (Table No. 8.12)


in 1999-2K to 66.40% in 2003-04 and decrease/increase from 61.30% in 2004-05 to

186

58.96% in 2007-08. Decrease took place to 49.06% in 2008-09. These averages at 59.76%

and varies at 16%.


increase from. 26.45% in 2003-04 to 39.83% in 2005-06. Again continuous increase took

place from 25.21% in 2006-07 to 47.05% in 2008-09. These averages at 33.12% and varies

at 26%.

Others Sources shows an alternate decrease/increase from 15.64% in 1999-2K to 5.15%

in 2004-05 and increase/decrease from 3.55% in 2005-06 to 3.90% in 2008-09. These


FINANCING OF WORKING CAPITAL-TABLE NO. 8.12NAFL





1999-2K 41.06 43.30 15.642000-01 59.47 30.32 10.212001-02 59.36 27.54 13.112002-03 74.62 19.99 5.392003-04 66.40 26.45 7.162004-05 61.30 33.55 5.152005-06 56.62 39.83 3.552006-07 70.74 25.21 4.052007-08 58.96 37.99 3.052008-09 49.06 47.05 3.90Mean 59.76 33.12 7.12S.D. 9.79 8.72 4.40C.V. 0.16 0.26 0.62


Fig No. 8.12

187

8.13 PRIVATE SECTOR (Table No. 8.13)

Short Term Bank Borrowings/Loans shows continuous increase from 37.31% in 1999-

2K to 50.29% in 2002-03 and alternate decrease/increase from 47.59% in 2003-04 to

48.04% in the year of 2005-06. Decrease took place from 52.75% in 2006-07 to 27.92% in



alternate increase/decrease from 47.77% in 2003-04 to 46.09% in 2005-06. Increase took

place from 40.65% in 2006-07 to 66.46% in 2008-09. These averages at 49.89% and varies

at 15%.

Others Sources shows an alternate decrease/increase from 8.41% in 1999-2K to 4.66% in

2002-03 and increase/decrease from 4.64% in 2003-04 to 6.21% in 2007-08. Finally

decrease took place to 5.62% in 2008-09. These averages at 6.39% and varies at 19%.

FINANCING OF WORKING CAPITAL-TABLE NO. 8.13PRIVATE SECTOR





1999-2K 37.31 54.28 8.412000-01 40.15 52.51 7.332001-02 40.34 52.20 7.462002-03 50.29 45.05 4.662003-04 47.59 47.77 4.642004-05 41.05 51.80 7.152005-06 48.04 46.09 5.872006-07 52.75 40.65 6.602007-08 51.69 42.10 6.212008-09 27.92 66.46 5.62Mean 43.71 49.89 6.39S.D. 7.78 7.44 1.23C.V. 0.18 0.15 0.19


188

Fig No. 8.13

8.14 INDUSTRY (Table No.8.14)


in 1999-2K to 45.98% in 2001-02 and continuous decrease from 49.02% in 2002-03 to

36.81% in 2004-05. Continuous increase took place from 57.02% in 2005-06 to 66.19% in

2007-08 and finally decreased to 61.22% in 2008-09. These averages at 51.77% and varies

at 18%.

Creditors show continuous increase from 41.88% in 1999-2K to 44.77% in 2001-02,

alternate decrease/increase from 42.27% in 2002-03 to 34.94% in 2005-06 and 29.65% in

2006-07 to 31.77% in 2008-09. These averages at 38.93% and varies at 20%.


and alternate increase/decrease from 10.99% in 2003-04 to 8.04% in 2005-06. Again

continuous decrease took place from 7.79% in 2006-07 to 7.01% in 2008-09. These


189

FINANCING OF WORKING CAPITAL-TABLE NO. 8.14INDUSTRY





1999-2K 46.00 41.88 12.122000-01 45.50 44.76 9.742001-02 45.98 44.77 9.252002-03 49.02 42.27 8.712003-04 47.44 41.57 10.992004-05 36.81 51.32 11.872005-06 57.02 34.94 8.042006-07 62.56 29.65 7.792007-08 66.19 26.35 7.452008-09 61.22 31.77 7.01Mean 51.77 38.93 9.30S.D. 9.41 7.89 1.84C.V. 0.18 0.20 0.20


Fig No. 8.14

Study shows that IFFCO, RCF, NAFL and Cooperative Sector have the highest percentage

of Short Term Bank Borrowings/Loans as a component of financing of working capital in

Cooperative Sector; Public Sector, Private Sector and Industry respectively. KRIBHCO is

the only exception which has not availed such finance. KRIBHCO, MFL GNVFC and

Private Sector in Cooperative Sector; Public Sector Private Sector; and Industry

respectively have the highest percentage of Creditors as a component of financing of

working capital. KRIBHCO, FACT, CFL and Public Sector in Cooperative Sector, Public

Sector, Private Sector and Industry respectively have the highest percentage of Other

Sources as the component of financing working capital.

chapter: 8 financing of working...

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