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CHAPTER 1

INTRODUCTION TO THE STUDY

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INTRODUCTION

Cash Management is the management of the cash balances of a concern in such a manner as

to maximize the availability of cash not invested in fixed assets or inventories and to avoid the

risk of insolvency. According to Keynes there are three motives for holding cash: the

transactions motive, the precautionary motive, and the speculative motive. The most useful

technique of cash management is the cash budget.

Cash management means improvement of the cash flow of a business and reduction of the

financial risk. Liquidity has become one of the scarce resources and it has become more

expensive. It is therefore sensible actively to optimize our working capital. In addition to the

improved cash flow through a reduced amount of tied-up funds, you may also avoid unnecessary

losses on for example debtors, reduce the purchase price through constructive analysis and active

dialogue with suppliers, obtain optimum balancing of the supply chain, etc.

BACKGROUND OF THE PROBLEM

In a business anything done financially affects cash eventually. Cash is to a business is what

blood is to a living body. A business cannot operate without its life-blood cash, and without cash

management, there may remain no cash to operate. Cash movement in a business is two-way

traffic. It keeps on moving in and out of business. The inflow and outflow of cash never

coincides. Important aspect which is unique to cash management is time dimension associated

with the movement of cash. Due to non-synchronicity of cash inflow and outflow, the inflow

may be more than the outflow or the outflow may be more than the inflow at a particular point of

time. This needs regulation. Hence there is a direct need to control its movement through skillful

cash management. The primary aim of cash management is to ensure that there should be enough

cash availability when the needs arise, not too much, but never too little.

Good cash management leads to good finance management. Active and gainful cash

management policies designed to speed up turnover, maximize return on investment. Efficient

management of cash will ultimately result in maximization of the owners wealth.

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INDUSTRY PROFILE

The Minerals and Metals industry has been flourishing since ancient times.Fr.Williams

Gregor in the year 1879 discovered ilmenite in konwat in England. He found that the black sand

contains some important metal but he failed to discover it .in 1875 a Hungarian scientist MartinKeinwitch found the same metal contents in the refine minerals. The metal was named

TITANIUM after of Greek methodology. The geographical survey of India found the presence

of monazite in the coastal sands of kerala.Besides the minerals deposits are found in

Tamilnadu,Orissa because of which they also have well established mineral industries.

Industries play a significant role in almost every economy but India context it is an

important as oxygen for breathing. Industrial development has been accorded great importance in

Indian planning. On account of industrial development there is increase in production,

employment and national income. India is the second largest growing economy in the world.

This is equally applicable to the Titanium Dioxide industry.

Titanium Dioxide pigment is authority white powder with high capacity, Brilliant

whiteness, excellent covering power, and resistance to color change. These opportunities have

made it authority valuable pigment for authority broad range of applications in the paint, plastic

goods, inks and paper.

The pigment is manufactured by processing naturally occurring Titanium containingRutile or Illmenite minerals. Rutile is an impure form or Titanium Dioxide, where as illmenite

contains titanium combined with iron as authority compound oxide. Though common throughout

the world, they are most readily exploited in Australia, USA, India and South Africa. Titanium

bearing minerals found in the coastal sands of the western Kerala coast and in the eastern region

on Tamil Nadu and Orissa. The minerals sands on the 22km belt in southern Kerala is said to be

one of the deposit. India today possesses the richest technology for the manufacture of Titanium

Dioxide through the sulphate and chloride route.

The two public sector manufactures, TTPL (Titanium tetra chloride Ltd) and KMML

have substantial capacity addition programmes. The capacity of TTPL is expected to touch

30000TPA by 2007 and that of KMML is expected to touch 100000 TPA by 2008, apparently,

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with the above capacities, both TTPL and KMML will produce Tio2 beyond the requirement of

the country. Keeping this in mind, both these units have started tapping the global market.

Currently there four unit in India engaged in the manufacturing of Tio2 pigment (Rutile &

Anatase) with a total combined capacity of 44560 metric tons per annum. These units are:

1)Kerala minerals and Metals Ltd Chavara, Kollam.

2)Travancore Titanium products Ltd, Trivandrum.

3)Kilburn chemical Ltd, Chennai.

4)Kolmark chemicals Ltd, Kolkata.

Titanium Dioxide is one of the top 20 inorganic chemicals of industrial importance. It is

the most important pigment material used. Titanium Dioxide has the highest refractive index

among the known materials and hence it imparts best pigment properties such as hiding power,

capacity, etc. Titanium Dioxide is the whitest of the White Pigments. It is used extensively in

paint, paper, plastic and other industries. High purity titanium dioxide is an important electronic

material First successful attempt to produce relatively pure titanium dioxide from ilmenite ore

was made by Rossi in USA in 1908. The first titanium pigment company which intially produced

composite pigments commenced production at Niagara Falls in 1918. Since those days and even

today USA has been in the vanguard of development of titanium dioxide industry. Anotherimportant landmark in the history of titanium dioxide was development of improved method of

thermal hydrolysis by Blumenfeld in 1920 in France. The technology was licensed to a number

of companies in Europe as well as in USA.

TITANIUM DIOXIDE INDUSTRY IN INDIA

The Titanium Dioxide industry is growing worldwide. The Indian reserves of Illmenite

and Rutile is expected to be around 6 crores tones. Beach reserve is also seen in Rathnagiri

(Mahi), Ganjan (orissa) and Srikakolam (AP).The reserve in Kerala and Tamilnadu is around 25

million tones, there are about 20 million tones reserves in Orissa. This information threw right in

to the possibilities of new manufactures and competitions in Titanium Dioxide pigment Industry

in the Indian market with the increasing demand for the paints, rubber, plastic and printing ink

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etc. The arrival of new manufactures will be more in the near future. This will ultimately results

in tight competition.

The demand of TiO2 highly depended on the finished products likes plastic, paint ,rubber

,paper ,printing ink, etc. The demand for the high quality Titanium Dioxide will increase the

profitability of the business.

The US$10 billion titanium dioxide pigment industry improved profitability in 2009

compared to 2008, as variable costs reduced at a faster rate than selling prices. Leading

producers also idled high cost plants during the year, leading to improved asset portfolios. A

rebound in demand in the second half of 2009 had plants winding back to full production rates.

TZ Minerals International Pvt Ltd (TZMI) announced that, according to its annual independent

in depth analysis of the global TiO2 sector, the weighted average manufacturing cash cost

decreased by 11% in 2009, while at the same time sector revenues contracted by only 4.5% on a

US dollar basis. The net result was a further rebound in the industry revenue to cash cost (R/C)

ratio to 1.21, taking the sector back to profitability levels last seen in 2006.

There was a significant decrease in the number of plants operating in a negative cash-

margin position in 2009. Whereas in 2008 TZMI calculated that 27% of the output that year was

operated with negative cash margins, in 2009 that had decreased back to 11%, or 16 plants. Inparticular sulfate producers saw significant relief in the form of low sulfuric acid and energy

costs, while some global producers have reset their portfolios by idling high cost plants said

David McCoy, Senior Partner at TZMI. In 2008 there were only 5 sulfate plants with costs

below the industry weighted average. In 2009 the number increased dramatically to 14 plants,

representing 15.5% of the production in the study. The differential in operating cost structures

between chloride and sulfate process plants nearly halved in 2009 over 2008 levels, coming back

in line with the differential last seen in 2006.

In 2009 global pigment demand was estimated at 4.68 million tonnes, down 3.0% from 2008.

Regionally, the main consuming markets for TiO2 pigment are the major industrialized

economies of North America, Europe and the increasing role for China. Per capita consumption

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is highest in North America and Western Europe. The greatest opportunities for growth lie in the

less developed high population economies, led by China and India.

Higher titanium feedstock prices are expected to be fully rolled out by 2011 to support

much needed investment decisions by the suppliers. Pigment manufacturers will have to pass

through reasonable price increases over the ensuing period just to tread water. Capacity

utilization rates are expected to rise sharply as the global supply chain is restocked. There will

still be an extended period of price and profitability recovery until global producers will commit

to brown fields expansions. There are not expected to be any new pigment plants built outside

China before 2012.

In India the titanium dioxide industry arrived almost with the dawn of independence.

First plant was set-up by the erstwhile State of Travancore in 1950. However, thereafter the

growth of the Indian industry has been rather sluggish. The per capita consumption of titanium

dioxide in USA is about 3.4 Kg.The consumption in Asia-Pacific region is about 0.2 Kg. The

Indian consumption, however, is extremely low at less than 0.05 Kg.

Titanium dioxide is produced and marketed in two grades. These are Rutile and Anatase.

Rutile has close packed structure whereas Anatase has, more open structure. Rutile has higher

density, higher refractive index, better resistance to chalking and higher hardness. Because ofhigh refractive index, titanium dioxide pigments exhibit the highest hiding power. If the hiding

power of Rutile is placed at 100 that of Anatase is 78. The hiding power of other common

pigments such as zinc sulphate, litho phone, white lead etc. ranges between 39 to 10.

The percentage of consumption in different sectors varies from country to country. In

USA coatings account for 51%, paper 24%, plastics 14% and other usages 11%. In most

countries, however, the share of usage in paper industry is lower at about 6-9%. The share of the

plastic industry is growing in all the countries.

Presently titanium dioxide is being manufactured in India by three companies. These are

Travancore Titanium Products Limited, Trivandrum, Kerala Minerals and Metals Limited,

Quilon and Kolmac Chemicals, Calcutta. The titanium dioxide industry is growing worldwide. A

number of new projects are on the ground. There is scope for another 10 major projects

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worldwide before the end of this century. Considering the wealth of mineral and technology

resources we have, we must ensure a due share of this global expansion of titanium dioxide

capacity for India.

World scenario

The use of Titanium Dioxide (Ti02) is very vast and it is produced in various parts of

the world at different levels, which includes multinational companies as well as small scale

companies. The credit of recognizing the existence of titanium goes to amateur geologist and

paster William Gregor i n 179l.The oxide was independently rediscovered in 1795 by Germen

chemist Martin Henrich Klaporth i n Rutile from Hungary.Kiaporth found that it contains a new

element and named it for the Titan of Greek mythology.

Titan is a God who is very hard to be pleased and since the reactivity of pigment

was feasible to almost anything. The use of Titanium minerals in welding electrode coating

gained acceptance inmid thirtees.Titanium metals has been of commercial importance since

1948.Mining of limonite is carried out several countries like Australia ,Norway ,Sri Lanka

,Malaysia ,South Africa. India

The first titanium pigment company which initially produced composite pigments

commenced production at Niagara Falls in1918.The first commercial product of titanium

was an alloy addictive to steel, where Ferro alloys were developed in commercial scale.

Titanium is far more stable than any other pigment. Its perfect non toxicity and chemical

inertness make it an ideal choice as a white pigment. The light scattering property of finely

TitaniurnDioxide is unmatched by any other non material. The chemical is available in two

crystalline forms, viz Anatase and Rutile, which are of much commercial significance. The

relatively softer anatase is the right material delustering ar ti fi ci al fibres.T i02 i s the whitest

of white pigment and has replaced less effective pigments. This is because of the unique

combination of its superior properties of high refractive index, low specific gravity, high

hiding power and opacity and no toxicity. It also has high tinting strength and dispersion

properties as well as chemical stability. The Ti02 marked is unique in that white it is a

product approaching 100 years old; there are still no functional alternatives that provide the

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same value in use of customers. The industry has gone through a metamorphosis in the past

decade. Looking over the next 20 year, at least some new Ti02 pigment will be made, through

most of the industries additional capacity will come from expansion pigment consumption

rose sharply in Western Europe and Asia or Pacific (excluding Japan) during the year

2000.East Asia is presently the most attractive region in the world.

The event t h a t revolutionized the Ti02 industry wa s the development of chloride

technology by M/s DuPont around 1959.The chloride technology took the US industry in

short span. Most of the sulphate route plants was closed or replaced by chloride route plants.

Usage of Ti02 extremely widespread over 170 countries each spend over and US 1 00000

per year on Ti02 pigment .Internationa l trade accounts for 55% of global consumption. The

total reserve of limonite in the world is estimated to be approximatel y 1 7 2 2 million tones.The range of heavy mineral deposit is found in the eastern and western coast of length 60km.

Ti02 was first produced commercially in 1923 and accounts for approximately 75% of

the total volume of pigment production. Ultra fine grades of Ti02 h a v e a primary particle

size or 10-50 km and are used predominantly as ultra violet blockers in sunburns and plastics

and in the catalyst most commerc ial Titanium Dioxide products are coated with inorganic and

organic compounds to control and improve surface properties

In the world there are about 14 major producers of Ti02. Ti02 is produced in 5

nations, which MNL with large installed capacities

Top players in the world

DuPont co, Wellington, USA Ishihara Ltd, Japan Rhone Poulence, France Bayer Lever Kusen, West Germany Kelmira Helsinks, Finland

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Hoitex, USA Millennium, Germany Fletcha Titanium Products, New Zealand Henduck, Korea

National Scenario

The Titanium Dioxide is growing worldwide. In India the Titanium Dioxide industry

arrived almost with the drawn of independent . India has a large reserve of beach coast of

Kerala and in the eastern region on Tamil Nadu and Orissa. Beach sand contains the

important heavy minerals such as limonite, rutile, leucoxene, zircon and silliminite.The

Indian reserves of limonite and rutile is expected to be around 60 million. The reserves inKerala and Tamil Nadu arc around 25 million tones. Beach reserve is also seen in

Ratnagiri (Mahi). Ganjas (Orissa), Srikakolam (A.P). These are about 20 million tones

reserves in Orissa. This information threw light in to possibilities of new manufactures and

competitions in Ti02 pigment industry in the Indian market with the increasing demand for

paints, rubber, plastic and printing inketc...The arrival of new manufacturewill be more in

the near future. This will ultimately results in tight competition. The demand of Ti02 highly

depended on the finished products like plastics, paints etc... The demand for the high quality

Ti02 will increase the profitability of the business.India today posses the richest technology

for the manufacture of Titanium Dioxide through the sulphateand chloride process.

India has a wealth of Titanium minerals with very low ratio of resource to utilization.

A sound Titan ium Dioxide industry is essential to ensure optimum utilization of these

resources as well as to develop a vibrant industry in the field of this strategic mineral. Although

some technology baseis available in the country for both sulphate and Chlo ri de processes of

Ti02 pigment manufacture, additional imports of knowhow and technology are considered

essential to update the existing sulphate and chloride technologies in the country. The Indian

raw material may be upgraded to synthetic rutile or Titanium slag being exported to fetch

better returns. Presently synthetic rutile is being manufactured in the country by I.R.E,

K.M.M.L and three other private companies. Another major project is likely to be set up

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for manufacture of Titanium slag that can be used for sulphate process, chloride process and

for the manufacture of Titanium sponge.

The Titanium Dioxide in dust ry is growing wo rl dw id e. A number of new projects

are on the ground. The Titanium Dioxide is a product which has to be sold basically in the

international market in competition with multinationals. Thus only a well planned

technolo gy and fi na ll y sound p ro j ec t will succeed. The .advantages under the

environment are ready availability of quality feed stock, low labor cost and less stringent

pollution Laws. The disadvantages are lack of technology, high power cost and uncertain

power availability.

Top players in India

The two public sector manufactures: TTPL (TITANIUM TETRA CHLORIDE LIMITED),

K.M.M.L (THE KERALA MINERALS AND METALS LIMITED). Currently there are 4

unit in India engaged in the manufacturing of Ti02 pigment with a total combined capacity of

44560 metric tons per annum.These units are:

K.M.M.L Travancore Titanium Products Limited, Trivandrum Kilburn Chemical Limited, Chennai Kolmar Chemicals Limited, Kolkata

The Indian paint industry has recorded growth of around 8 0 % during the previous years.

The Indian paint industry is expected to expand to almost 1.6 and 1.75 million metric tons by

the year 2005. The current per capita consumption of paints at around 5 kg as compared to

between 15 kg and 20 kg in the developed countries, that leaves considerable potential in the

overall demand ofTi02 in India, which is based on 8% growth.

State Scenario

At present in Kerala, T.T.P and K.M.M.L are the only two manufacturers who produce

Titanium Dioxide pigment. Indian Rare Earth Ltd a Govt of Indian undertaking has a mineral

separation unit in chavara which separates minerals from each sands.K.M.M.L have a mineral

separation unit in coast area. Bringing more to your everyday life K.M.M.L touches in numerous

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ways. Be it the dress you wear, the cosmetic you use, the medicines you take, the paints you

decorate your home .Ti02 is there. It is the only integrated Ti02 factory having mineral

separation, mining, synthetic rutile and pigment production plant. Manufacturing Ti02 through

the chloride route, K.M.M.L produces very pure Rutile grade titanium Dioxide pigment.

The different grades churned out by K.M.M.L under brand name "KEMOX" has a ready market

which asks for more. The commendable work in the research by the R&D department has also

helped K.M.M.L to add more colors to its portfolio. K.M.M .L is used chloride technology.

K.M.M.L is also known as Titanium Complex". K.M.M.L is the only zero debt industry in

Kerala

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COMPANY PROFILE

The KMML was established by a private entrepreneur in 1932 as F.X. Peraira and sons

(Travancore) Pvt. Ltd. During 1956 this concern was taken over by the state govt and was placed

under the control of its industries department. The units were converted as a limited company

with effect from 1.4.1972 in the name of Kerala Minerals and Metals Ltd

India is one of the pioneers in the field of mineral sand industry in India Kerala Minerals and

Metals Ltd (KMML) is a fully owned Kerala Govt Enterprise. There are about 2000 employees

in the company at present that are helping KMML to grow.

KMML, a fully owned Kerala Govt Enterprise is the worlds first fully integrated

Titanium Dioxide plant .Since its inception, KMML has made an incredible mark in the field of

mining, mineral processing and manufacturing. With the state of art factories at

Shankaramangalam and Kovilthottam, KMML has won national acclaim for its impressive

performance. KMML is the Indias first and only manufacturer of rutile grade Titanium Dioxide

by Chlorine route. KMML products are marketed under the brand name KEMOX. KEMOX RC

822 is a multiple application pigment which is in great demand in the world market. KMML also

produces other grades of Titanium dioxide pigment like RC 800 PG, RC 800, RC 813, and RC

808.Product range includes Titanium Tetra chloride, Illumenite , Rutile, Leucoxene and

sillimanite which are the basic raw materials for variety of industrial uses.

KMML also manufactures iron oxide bricks used for building purposes. The production

of these bricks from waste iron oxide is an in-house development. Close access to one of the

worlds richest beaches helps KMML retain its leadership. KMMLs Titanium pigments are

reputed for their high degree of gloss, tint retention capacities and ease of dispersion. These

qualities give KMML affordable indent. These qualities give KMML affordable identity in this

industry. KMML is certified ISO 9002 in the year 2000 for implementing world class quality

standards.

According to the corporate plan, by 2007-2008, the domestic revenue generation will be

less than 30 percent. They have already proved their capacity to produce internationally

adaptable quality product at competitive prices.

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The present global demand of Tio2 is 50 million tones, which is produced by 71

companies around the world. Of this, 29 million tons of Tio2 is produced by the chloride route

by 26 companies; he remaining 21 million tones are produced by 45 companies through the

sulphate process. This it is a clear indication that in the global market, the chloride technology

products are most in demand.

To increase its presence in the international market and counter the import competition,

KMML is all set to expand its Tio2 production capacity. The capacity increase will move in a

phased manner to 45000 tones to one lakh tones. To achieve this, capacity of the mineral

separation (MS) plant is being raised from present 50,000 tones to two lakh tones of illmenite.

Besides a new MS plant, it is planning set up a 1.3 lakh tones synthetic Rutile plant. As per

current estimate, the first phase expansion would involve and investment of 150 crore while theentire expansion programme would cost an estimated Rs.750 crore. The entire expansion process

is planned without any imported technical know-how or any major external borrowings other

infrastructure. The company has to deal with fierce competition in the international markets as

well as in the domestic market with import duties coming down every year.

History ofK.M.M.L

F.X.Pereira &Sons (Travancore) Pvt. Ltd. was established by a dynamic Indian

entrepreneur, late Sri J .E.A. Pereira who was a man of vision and foresight. Under his able

management the company prospered in spite of the vagaries of foreign market and the

competition from the other three firms which were of foreign ownership. Sri Pereira

constantly tried to improve the mineral separate on technology and for this purpose he

experimented with the latest ideas then available, even before they had been fully tried in the

technologically advanced countries. He also attempted to take up further processing of the

minerals after separation. By mid 1950s his company face financial crisis. Large amounts

due to the state Government by way of taxes and r o y a l t y fe l l in to arrears and the State

Govt. took over the management of the company in January 1 9 5 6 .

From 1956 to 1 972 the company was run by the Industries Department of Govt.

Kerala under the name "F.X.P. M I N E R A L S In 1956. Sri Pereira passed away in April

1971 the ownership of the company was transferred to the State Govt. through a sale deed

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executed by the legal heirs of Sri Pereira. By that time the market for the minerals had

improved. The State Govt. had come to realize that the mineral deposit of was the richest

mineral asset of the State and that it had to be exploited on a larger scale for augmenting the

State's revenue and certain employment opportunities. A fully owned State Govt. undertaking

by name THE K E R A L A MINERALS AND METALS LIMITED". This company took

over the assets and liabilities of F.X.P. Minerals

F.X.P. Minerals used to supply llmnite to Travancore Titanium Products, which

came into pigment industry in 195l.increasing demand for pigment in the country opened

the eyes of the Govt. and some private entrepreneurs, to the great potentiality that existed

in the field. The State Govt. took up and completed an expansion ofT.TP in 1973.K.M.M.L

was entrusted by the state Govt. in this task.

Kerala Minerals and Metals Limited are now engaged i n mining and separation of minerals

in the plant which it inherited from F.X.P Minerals. Recently improvements were made in the

plant. Adding some new machinery. A major portion of the production is now marketed in

India and the company has exports i n 55 countries. The company now enjoys 2000 people.

The company has Mineral Separation Unit, Titanium Dioxide Pigment Unit and Titanium

Sponge project

Milestones of K.M.M.L

1974: Letter for intent for the production of 48000 tones of Ti02 pigment throughChloride

Process technology .Collaboration agreement with:

Benelite Corporation of America, USA -Synthetic Rutile Plant WoodallDuck ham.

UK- ARP

Kerr Me Gee Chemical Corporation, USA- Titanium Dioxide pigment

1979: Constructionof plants started at Sankaramangalam , Chavara.

1983: R&D recognition for K.M.M.L laboratoryby DSIR.

1984: Commissioned the first integratedTi02 plant in the world

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Launched for the first time in India. Rutile grade Titanium Dioxide pigment

Under trade name KEMOX RC - 822

1992: Launched another grade of Ti02 KEMOX RC 800

1992: Launched plasticgrade pigment KEMOX RC 800 PG

1992: Won the first nationalaward for in the efforts in industry for

Technology absorption under TAAS programmesby DSIR

1997: A newgrade pigment for the new water based paintapplication was

Introduced KEMOX RC 813

1998: Launched another improved grade pigment KEMOX RC 822 SG

(Renamed as KEMOX RC 802)

1998: commercial production of Iron Oxide Bricks from the waste Iron Oxide

-An innovative development by in house R&D

1998: Supported Combustion process was successfully commissioned in one of

The streams of Oxidation plant. This in house developed process is significant

Breakthrough which enables K.M.M.L to improve productivity Of

The plant and further capacity enhancement.

1999: By pass system in both streams and support combustion system in other

Streams were also commissioned.

1999: Erected and commissioned one more chlorinator in chlorination section.

2003: New modern Lime Preparation Plant (LPP) for efficient neutralization was

Commissioned.

2004: commissioned new OM plant and added two more digesters in IBP.

2004: commissioned a new product packaging machine, modern energy efficient

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Filter and drier system, DCS system in Unit 400.

2005: World class QMS like ISO 14001 and OSHAS 18000 Implemented.

2006: Capacity enhancement to 40000MT.

2006: Foundation stone laid for Titanium Sponge Plant.

2007: Commissioned Recovery Cyclone.

2008: commissioned new ETP sludge and oxide pond.

2009: Development of Nano Titanium particles in laboratoryscale.

2010: Introduced new production method for Titanium Sponge with the

Help of DRDO&ISRO.

2011: Integration of new premises for Titanium Metal production.

VISION

Be a world class product ofmineral sand based value added products''

MISSION

To become the nodal agency for promoting and establishing mineral basedindustries in the state to value addition and effective and controlled

exploitation of the minerals reserves.

To develop adequate supply base for the services and utility for developmentof the mineral based industry.

To create more awareness about CSR for chemical industries in the state. To become the leader in controlling Green house Gas emissions. So as to

promote the concept of Green Earth.

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K.M.M.L has a worldwide reputation and socially responsible company with an

eco friendly image. The company derived strength from its dedicated manpower and customer

organization.

Objectives ofK.M.M.L

To exploit the minerals wealth abundantly available in the coastal belt. To manufacture value added products like Titanium Dioxide and Titanium

Metal through chloride route technology.

Large scale generation of employment in the state. Over all development of local area in particular state in general.

Key success factors

Encouraging innovation &technology. Training and empoweringthe work force. Caring for requirements of the society. Compliance with documented quality system. Customers driven continuous improvement.

Management

On the top of K.M.M.L there is a Chairman, he is the principal secretary to

Industries Department of Kerala Government. But he is only a part time Chairman since his

position changes. The Managing Director is the head of K.M.M.L. He is appointed for a

period of 3 years. He is entrusted to co-ordinate all the functions of the organizationon behalf

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of the Govt. Board of Directors are promoted ofK.M.M.L and they are 6 in number, who were

appointed by the Govt. of Kerala. They are appointed for a period of 5 years but the Govt.can

change them as they with.

Future Plans

l. Existing Ilmenite Beneficial Plant 5000 unit per annumcapacity utilization.

2. Titanium S p o n g e P lan t 5 0 0 m e t r i c tons i n co l l ab or at io n wi th VISMA

Technology.

3. Introduction of mineral research Institute. .

4. Introduction of unit 100 Titanium plant oxygen plant.

5. Introduction of new fluid dispend boiler.

6. Enhancementof Mineral Separation Unit.

7. Introduction of a NANO pigment plant.

8. Introduction of Titanium oxychloride production.

9. Introduction of filter plus plant iron oxide cake production.

10. Introduction of additional chlorinators and Titanium Tetra Chloride plant

11. Implementation of social accountability standards SA 8000.

Corporate Social Responsibility

A desalination plant ensures that ground water levels arc maintained at safe levels

and the ecological balance is not affected due to the water requirements of the company). A

centralized effluents neutralization plant which ensures that no harmful wastes are let out.

Provision of drinking water for surrounding villages has been provided through 52 km of

pipeline. Regular medical camps and other programs aimed at improving health and

hygiene of employees. Financial assistance is given to schools, clubs, an d o t h e r charitable

bodies for pu r c h a s i n g books, furniture and sports goods.

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Technical collaborations

The company received a letter of intent for 48000 tons ofTi02 pigment using Chloride

route technology in 1974. The K.M.M.L entered into technical collaboration with

multinational corporations like M/s Kers Mc Gee Chemical Corporation of USA for

Titanium pigment production, M/s Benedict Corporation of America for JBP, M/s Woodall

Duk ham for ARP. MECON, a Govt. of India undertaking did the detailed engineering.

Awards and recognitions

International gold medal award for qualityand efficiency in 2003

APCJ award from ASIA PACAFIC COATING FORUM for the BEST

INTERNATIONAL MARKETING CAMPAIGN in May2003

Award for R&Defforts in industry in 1992

FACT MKK Nair Memorial Productivity Award in 1993-1994

Energyconservation Award in 1999

FACTMKK NairAward in 1999-2000

FACT MKK Nair Memorial Productivity Award in 2000-2001

Energyconservation Award in 2001

CAPEXIL Award for best export performancein 2003, 2004&2005

National Awa rd f or b es t r ev enu e p er fo rmed by G ovt .of Indi a in

2003&2004

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Product Profile

SL No PRODUCTS APPLICATION

1 Titanium Dioxide Paints , Printing inks Plastics,Paper,

Rubber, Textiles, Ceramics

TitaniumTetra Chloride

Titanium Dioxide Pigment,Titanium

Sponge/ metal, Titanium Salts, Titanium

oxychloride, Buty Titanate.

3 Rutile Welding electrodes, Titanium compounds,

Titanium Dioxide Pigment, Titanium Sponge/metal,

Titanium Tetra Chloride

4 Ilmenite Synthetic Rutile, Titanium Dioxide

Pigment, Titanium Tetra Chloride, Ferro Titanium

alloys, Welding electrodes, Titanium dioxide Salts.

5 Leucoxene Welding electrodes, Titanium Dioxide

Pigment, Titanium compounds, Titanium

Tetra Chloride

6 Zircon Ceramics, Foundries Refractories, irconium

Chemicals, Zirconium metals, Nuclear technology

7 Silimanite High temperature refractory ceramics

8 Iron oxide bricks As building material

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At present K.M.M.L produces about 6 grades of TiO2 pigments are produced in K.M.M.L ,their

main properties use are:

GRADE MAIN PROPERTIES USES

RC800 Excellent tining, strength good gloss,

good dispensability, high brightness.

Interior glass and semi gloss paints,

interior decorative and industrial paints

,wood finishes , and most printing ink

applications.

RC802 Excellent balance of optical properties

and durability

High performance multipurpose

products.General architectural interior

and exterior finishes, marine , coal andpower coatings,all classes of waterborne

and solvent based coatings.

RC808 Good dispensability , excellent

dispensability

Used for coating with glass to which

prevents the spreading of water. This

helps the automobile industry to design

the vehicle without using any wipers.

RC813 Excellent haze free gloss and gloss

retention , high tining strength, high

dispensability

Malt decorative and emulsion paints, matt

printing inks.

RC822 High hiding power in high PVCformulations, good dispensability, good

durability ,high brightnes.

Exterior applications and power coating,water and solvent based paints, decorative

and industrial coatings.

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RC800PG Finer particles size, blue under stone

and good dispensability.

Plastics , rubber and floor tiles.

Quality System

IS09001-QMS

K.M.M.L was certified for quality standard IS09001:9004(1nternational

Organization for Standardization )in June 2000 and was rectified and upgraded to ISO 9001 :2000

QMS in November 2003 for its Total Production Unit.

ISO 14001-Environment Management System

Bureau Virtues Quality) International (BVQI ) issued the certificates with accreditation

logo UKAS(United Kingdom Accreditation Services) improve the environmental performance

goals, monitor and measure effectiveness, correct deficiencies and problems ensuring

authority, good housekeeping and review its management system to promote continuous

improvement.

Environment Policy

a. K.M.M.L has also introduced a number of social welfare schemes forWelfareof people.

b. Drinking water supply for surrounding villagesthrough a 25 km pipelineNetwork.

c. Conducting medical camp /hygiene/health program for the public i n

Association with charitable organizations.

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d. Offering financial assistance to local schools and clubs for the purchaseOf books, furniture, sports goods .etc...

e. Supporting rural electrification.

OHSAS-18001 Safety Management System

Work place safety is emerging as one of the key risk management and regulatory

compliance focus areas among ma ny global companies . OHSAS 18001(Occupational

Health and Safety Assessment Scheme) is authority consensus standard developed

in1999 by an independent group of national standards bodies and certification bodies.

Pollution Control

K.M.M.L has elaborate pollution control system with respect to both air and

water pollution. The waste (acid) from IBP is send to Effluent Neutralization Plant

(ENP).ENP consists of Primary Neutralization Tank (PNT) and secondary

Neutralization Tank (SNT) where it is treated with Caustic Soda solution. The totally

neutralized slurry from the SNT is pumped to 50000m3 capacity setting pond provided

with impervious clay, polythene lining at bottom side, where the solids are settled. The

day solution from setting pond of 25000m3 capacity where the balance solids are

allowed to settle the clean water from the polishing pond meeting all specification

situated by pollution control board authorities is pumped in to the Arabian Sea. All

gases from Chlorination, Oxidation, IBP and ARP arc scrubbed water /line/ caustic

solution to absorb the toxic gases diluted with fresh air and only let out to theatmosphere through tall slacks.

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CHAPTER 2

BACKGROUND OF THE PROBLEM

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LITERATURE REVIEW

Cash is the important current asset for the operation of business. Cash is the basic input needed

to keep the business running on a continuous basis. It is also the ultimate output expected to be

realized by selling the services or product manufactured by the firm. Thus, Cash management isone of the key areas of working capital management. The basic objectives of finanacial

management are to match the inflows and outflows of cash and ensure the liquidity and adequate

cash position of a concern during a particular period.

Its efficient management is crucial to the solvency of the business because cash is the

focal point of the funds flows in a business. It can be understood in two senses, one is actual cash

held by firm and deposits withdraw able on demand, and in another sense it includes marketable

securities, which can be convertible into cash immediately

The goal of cash management is to reduce the amount of cash that being used within the

firm. So as to increase profitability, but without reducing business activities or exposing the firm

to undue risk in its financial objectives.

Cash flows in connection with credit serve to introduce the concept of Float which is

the time lag or delay between the moment of disbursement of funds on the part of the customer

and the moment of receipt of funds on the parts of the seller (ie.,mail time, processing time, and

clearing time with the banking system)

Meaning of cash

The term cash has a variety of meaning. In a narrow sense, that it includes coins,

currency notes, bank drafts, withdraw by cheque on demand and bank balances in bank accounts.

In broader sense, the term cash refers to as near cash assets. Cash is both a fundamental resource

and the means by which the entity acquires other resources. To manage cash is to manage the

entity's ability to purchase assets, service debt, pay employees, and control operations. Thus,

effective cash management directly correlates with the entity's ability to realize its mission,

goals, and objectives.

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Cash Management comprises of a series of activities aimed at efficiently handling the

inflow and outflow of cash. This mainly involves diverting cash from where it is to where it

is needed. In other words, cash management is the optimization of cash flows, balances and

short term investments. Cash in this context, may refer either to cash in the form of currency, or

to other equivalents such as cheques, drafts, deposits, among others. While organizations may

hold other assets which can potentially be converted to cash, cash management essentially

deals with the management of liquid cash and near-cash assets such as marketable securities

and time deposits, which can be readily converted to cash. The primary feature of such

cash balance is that it has no earning power. Nonetheless, it is crucial to organizations for

three main reasons:

TransactionReady cash balances are vital for routine transactions including purchases, operating

expenses, wages, and other payments such as dividends, taxes and so on.

Precaution: There may be unanticipated cash requirements as a result of suddenincrease in inventory costs, delay in collection of receivables, among others. And

maintaining ready cash balances is essential to deal with such unforeseen expenses.

Speculation: Reserving cash balances is also crucial when firms anticipate decline inprices of raw materials, reduction in interest rates for buying securities, availing early

payment discounts, among others.

MOTIVES FOR HOLDING CASH

1. The transaction motive

The transaction motive requires a firm to hold cash to conduct its business in the ordinary

course. Firms are in existence to create products or provide services. Production and

supply of products results in cash inflows and outflows. Firms hold cash in order to

satisfy the cash inflows and outflows needs that they have.

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2. The precautionary motive

The precautionary motives are needed to hold cash to meet contingencies in the future. If

expected cash inflows are not received as expected cash held on a precautionary basis

could be used to satisfy short term obligations that the cash inflows may have been bench

marked for.

3. Compensating motive

Banks provides a variety of services to business firms, such as clearances of cheque ,

supply of credit etc.,for which a minimum balance is required to be kept with the bank ,

this balance is to competence banks for services rendered.

4. The speculative motive

The speculative motive relates to the holding of cash for investigating in profit making

opportunities as and when they arise. Economist Keynes described this reason for holding

cash as creating the ability for a firm to take advantage of special opportunities that if

acted upon quickly will favor the firm. An example of this would be purchased extra

inventory at a discount that is greater than the carrying costs of holding the inventory.

Cash management is concerned with the managing of:

Cash inflows and outflows of the firm Cash flows within the firm Cash balances held by the firm at a point of time by financing deficit or investing

surplus cash.

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STRATEGIES WITH THE FACETS OF CASH MANAGEMENT

Cash management is important because it is difficult to predict cash flows accurately. In

order to resolve the uncertainty about cash flow prediction and lack of synchronization between

the cash receipts and payments. The firm should develop appropriate strategies for cashmanagement. The firm should evolve strategies regarding the following four facts of cash

management.

Cash planning Managing the Cash Flows Optimum Cash Level Investing Surplus Cash

CASH FORECAST

Cash forecasting may be done on short or long term basis.

1. Short term forecasting methodsShort term forecast generally cover a period of within 12 months. It is also called cash

budgeting where short financing requirements is focused.

The receipts and disbursement method The adjusted net income method

2. Long term cash forecasting:

All the forecast beyond one year come under this head. These forecasts are

prepared to forecast of long range investing and financing of a business in term of the

strategic goals of an enterprise. The main purpose of long-term forecast to meet specific

requirements for say companys expansion, modernization acquisition etc.

Uses:

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Indicate companys future cash needs Helps to evaluate proposed capital projects Helps to improve corporate planning

WAYS TO MANAGE CASH

Firms can manage cash in virtually all areas of operations that involve the use of cash. The goal

is to receive cash as soon as possible while at the same time waiting to pay out cash as long as

possible. The two objectives in managing cash flows are:

Accelerate cash collections as soon as possible To decelerate or to delay disbursement as soon as possible

CONTROLLING INFLOWS OF CASH OR SOURCES OF CASH

It is important function of cash management. In order to ensure effective cash management

accelerate collection , slow up disbursement and maximize available cash , the following

methods can be adopted:

Accelerating cash collection Concentrating Banking Lock-box system Efficient Inventory Production Management.

1) Accelerating Cash Collection

Collection can be accelerated by way of.

Speed mailing time of payments from customers to the firm Reduce the time during which payments received by the firm remain collected

funds

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Speed the movements of funds to the disbursement banks Reducing the firms operating cash requirements by speeding up the collection

2) Concentration Banking

Concentration banking is the system of decentralization collection of accounts

receivable. In another words, under this system number of centers are opened for

collection of payments against sale. The purpose is reducing the time gap between

dispatch of cheque by customers and actual receipts of same by the concerned firm.

3) Lock-box system

A post office box maintained by a firms bank that is used as a receiving point for

customers remittances.

Customers are instructed to mail their remittances to the lockbox location Bank picks up remittance several times daily from the lockbox Bank deposits remittances in the customers account and provides a deposit slip

with a list of payments

Company receives the list and any additional mailed items

Another way of minimizing required cash is to increase the inventory turnover rate. It can

be achieved by:

Increasing the raw material turnover Decreasing the production cycle-by initiating better production planning and

control technique, the firm can reduce the length of production cycle.

Increasing the finished goods turnover.

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OBJECTIVES OF CASH MANAGEMENT

The cash management strategies are generally built around two goals:

To provide cash needed to meet the obligations To minimize the idle cash held by the firm.

The financial manager has to strike an acceptable balance between holding too much cash and

too little cash. This is the focal point of the cash risk return trade-off. A large cash investment

minimizes the chances of default but penalizes the possibility of the firm.

A small cash balance target may free the excess cash balance for investment in marketable

securities and thereby enhancing the profitability as well as value of the firm, but increase

simultaneously the chances of running out of cash. The risk-return trade-off any firm can be

reduced to two prime objectives for the firms cash management system, as follows:

i. Meeting the cash outflows:The primary objective of cash management is to ensure the cash outflows as and when

required. Enough cash must be on hand to meet the disbursal needs that arise in the normal

course of business. The firm should be able to make the payments at different points of time

without any liquidity problem.

It means that the firm should have sufficient cash to meet the payment schedules and

disbursement needs. It will help the firm in.

Avoiding the chance of default in meeting financial obligations, otherwise thegoodwill of the firm

Availing the opportunities of getting cash discounts by making early or promptpayments and

Meeting unexpected cash outflows without much problem

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ii. Minimizing the Cash Balance:

Investments in idle cash balance must be reduced to a minimum. This objective of

cash management is based on the idea that unused asset earns no income for the firm. The

funds locked up in cash balance are dead investments and has no earning. Therefore

whatever cash balance is maintained the firm is foregoing interest income on that

balance. The objective of cash management therefore, should be to keep minimum cash

balance.

WAYS TO IMPROVE COLLECTION OF CASH

A. Changing customer paying habits.

Letters, telephone calls or personal visits. Economic incentive for paying bills faster

B. Improve the Delivery system

Regional banking (customers pay bills to banks since they can transfer funds morequickly than mail order delivery)

Lockbox collection system (firm rents a post office box in a particular city and the bankmonitors the lockbox periodically).

Electronic communications.

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TYPES OF SHORT-TERM INVESTMENT OPPORTUNITIES

1. Treasury billsTreasury bills are short-term government securities. Usually, they are sold at a

discount and redeemed at par. The difference is the return on security. They can bebought and sold any time, thus they have liquidity. Also they do not have the default risk.

2. Commercial papers:Commercial papers are short-term, unsecured securities issued by highly

creditworthy large companies. They are issued with a maturity of three months to one

year.

3. Certificates of DepositsCertificates of deposits are negotiable instruments evidencing of the deposits of

funds at a commercial bank for a specified period of time at a specified rate of interest.

4. Bank depositsA firm can deposit its temporary cash in a bank for a fixed period of time. The

interest rate depends on the maturity period.

CASH MANAGEMENT TECHNIQUES

Following are the important techniques used for the analysis of cash management.

Cash Flow Statement Ratio Analysis Trend analysis

3.1 CASH FLOW STATEMENT

An analysis of cash flows is used for short-run planning. A firm needs sufficient cash to pay

debts maturing in the near future, to pay interest and other expenses and to pay dividend to share

holders. The firm can make projections of cash inflows and outflows for the near future to

determine the availability of cash. The cash balance can be matched with the firms need for cash

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during the period, and accordingly, agreement can be made to meet the deficit or invest the

surplus cash temporarily.

A historical analysis of cash flows provides insights to prepare reliable cash flow projection for

the immediate future. A statement of changes in financial position on cash basis, commonlyknown as the cash flow statement, summarizes the causes of changes in cash position between

dates of the two balance sheets. It indicates the source and uses of cash.

Ratio Analysis

One of the most important financial tool which have come to be very frequently used for

analyzing the financial strength and weakness of the enterprise is ratio analysis. Ratio Analysis is

the process of determines and presenting arithmetical relationship between the figures and the

group of figures drawn from the statement. The ratio analysis of working capital is used by the

financial analyst to check upon the efficiency of the working capital of the enterprise. It is found

out by establishing the relationship between the items of Balance sheet, Trading and Profit and

Loss account. The ratios relating to cash management, which have been selected for the study,

are:

a) LIQUIDITY RATIOS1) Current ratio2) Quick ratio3) Absolute liquid ratiob) PROFITABILITY RATIOS4) Gross profit ratio5) Net profit ratio6) Operating ratioc) ACTIVITY RATIOS7) Inventory turnover ratio8) Fixed asset turnover ratio9) Debtors turnover ratio10) Working capital turnover ratio

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Current Ratio

Current ratio is the most common ratio for measuring liquidity. It represents the ratio of current

assets to current liabilities. It is also called as working capital ratio. It is calculated by dividing

the current assets by current liabilities.

Current ratio = Current assets / Current liabilities

Quick ratio

This ratio is also known as Acid Test Ratio or liquidity Ratio. It shows the relation between the

quick assets and current liabilities. It is determined by dividing the quick assets by current

liabilities. The term quick asset refers to the current assets which can be converted into cash

immediately.

Quick ratio = Quick ratio/ Current liabilities

Absolute Liquidity ratio.

This ratio is obtained by dividing cash by current liabilities. Here the cash involves cash in hand,

bank balance and investment in securities, treasury deposits etc. A ratio of 0.75: 1 is

recommended to ensure liquidity. This test is most vigorous to measure a firms liquidity

position.

Absolute Liquidity Ratio = (cash + marketable securities)/ current liabilities

Gross profit ratio

The gross profit ratio plays an important role in two management areas. In the area of financial

management, the ratio serves as a valuable indicator of the firms ability to utilize effectively

outside source of fund.

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Net profit ratio

This ratio is also called as net profit to sales or net profit margin ratio. It is determined by

dividing the net income after tax to the net sales for the period and measure the profit per rupee

of sales. This ratio is calculated as follows:

Net profit ratio = (Net profit /sales)* 100

Operating ratio

Operating ratio measures the cost of operation per rupee of sales. It is generally represented as

percentage. Thus two elements of the ratio are cost and net sales. Operating expenses and cost of

goods sold. Its calculated as:

Operating ratio = (operating cost / net sales)*100

Inventory turnover ratio

This ratio indicates whether investment in inventory is sufficiently used or not it. Therefore

explains whether investment inventories are within the proper limit or not. It also measures the

effectiveness of the firms sales efforts.

Inventory turnover ratio = cost of goods sold / average stock

Fixed asset turnover ratio

This ratio indicates the extent to which the investments in fixed assets contribute towards sales.

If compared with the previous year, it indicates that whether the investment in fixed asset has

been judicious or not.

Fixed asset turnover ratio = Net sales / fixed assets

Debtors turnover ratio

The purpose of this ratio is to discuss the credit collection power and policy of the firm. For this

ratio a relationship is established between account receivables and the net credit sales of the

period.

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Debtors turnover ratio = Net credit sales / Average Debtor

Working capital turnover ratio

The ratio reflects the turnover of the firms net working capital in the course of the year. It is a

good measure of trading. The ratio is calculated by dividing net sales by net working capital.

Working capital turnover ratio = Net sales / Net working capital

Average Collection Period

Average Collection Period shows the efficiency of the management in the collection of debts due

from the debtors. It measures the numbers of days in which the money is collected from sundry

debtors. A higher ratio increases the chances of bad debt in the business and vice versa. It is

computed using the following formula.

Average Collection Period = Number of days in year

Debtors turnover ratio

CURRENT ASSETS TO FIXED ASSET RATIO

Current assets are invested in various fixed assets to make production and earn considerable

profit. The efficiency with which assets are managed directly affects the production and volume

of sales. Current asset to fixed assets ratio helps to measure the efficiency of a firms to utilize its

level of current assets to fixed assets.

Current Assets to Fixed Asset Ratio = Current Asset/ Fixed Assets

CASH TO CURRENT ASSETS RATIO

The lower the ratio the greater may be the profitability of the concern. 'In a comfortably financed

business it will probably run not 5 to 10 percent of current assets. Since current liabilities are not

expected to exceed one-half of the current assets, cash percentage should not run under 10 to 20

percent of the same. Sometimes debtors and cash are taken together in such a case, 'it may be

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stated in a general way that cash and debtors together should be 50 percent of and stock and

other assets should be remaining 50 percent of the total current assets."It is calculated as:

Cash to Current Assets Ratio = Cash / Current Assets

CASH TO SALES RATIO

It is one of the most important ratios of assessment of control of cash flows. This ratio provides a

deep insight into the amount of cash balance held by a concern. In the words of Professor John

Sengan, The increase in sales is generally associated with larger bank balances.The growth of

which will increase decrease as the size of business increases."

Cash to Sales Ratio= Cash/ Sales

CASH TURNOVER RATIO

It is yet another measure of assessing the sufficient of cash. Cash turnover ratio is calculated by

dividing the amount of total sales by the amount of total sales by the amount of total cash

available at the end of the accounting year. It indicates the number of days for which the

particular amount of cash held was sufficient to finance the business operations. If a firm

turnover its cash larger number of times, it can finance a larger volume of sales with relatively

lesser cash resources. Thereby, increasing the profitability of a concern. While a declining trend

in this ratio exhibits firm's failure utilizing the available resources to its optimum.

Total Sales/Total Cash available at the end of the accounting year

CASH POSITION RATIO

It may be calculated as the ratio of cash to current liabilities. It helps in analyzing the level of

liquid resources in relation to current obligations. For this purpose, cash is used in broader sense,

which includes cash balance, bank balance and marketable securities. A higher cash position

ratio implies that the firms unable to make profitable use of cash resources. So, lower the ratio of

cash to current liabilities, favorable it is. While, the standard norm set for cash position ratio is

0.5:1.

Cash/Current Liabilities

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3.2 Trend AnalysisThe tern trend analysis refers to the concept of collecting information and attempting to

spot a pattern, or trend, in the information. In some fields of study, the term trend

analysis has more formally defined meanings. Trend analysis is a mathematical technique

that uses historical results to predict future outcome. This is achieved by tracking

variances.

The straight line trend is given by the equation Y= a+ bX. Here a is the Y interprets and

b is the spot of the trend line. Here Y value denotes debtors.

Where,

Y

a=

N

XY

b=

X 2

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RESEARCH METHODOLOGY

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OBJECTIVES:

1. To study and analyze the activity and operational efficiency of cash management inK.M.M.L

2. To analyze the liquidity and profitability of K.M.M.L3. To estimate the inflow and outflow of the cash of the Kerala Minerals and Metals

Limited.

4. To estimate the average collection period of debtors.5. To evaluate the uses of funds by the firm and in determining how these uses were

financed.

6. To offer valuable suggestions to improve cash management in K.M.M.LRESEARCH DESIGN

The research design used in this project is Analytical in nature the procedure using,

which researcher has to use facts or information already available, and analyze these to make a

critical evaluation of the performance.

Data Collection

Primary Source

Data are collected through personal interview and discussions with Finance Executives

Secondary Sources

The data are collected from the annual reports maintained by the company for the pastfive years viz..,2006-2011

Data are collected from the companys website. Books and journals pertaining to thetopic

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PERIOD COVERED BY THE STUDY

This project work was carried out at K.M.M.L, Kerala in their finance departments annual

report from 2007-2011.

Tools and Techniques of data collection

1. Ratio analysis2. Cash flow statements3. Trend analysis4. Schedule of changes in working capital

Tools used for the projection of Findings

1. Tabulation2. Percentages3. Ratios4. Percentage bar charts

SCOPE OF THE STUDY

The research helps to study and manage the cash inflow and outflow. The study analyses the benchmark of cash required to meet its obligations The study helps to minimize the idle cash held by the firm Necessary actions can be taken in order to improve the financial position of the K.M.M.L

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LIMITATIONS OF THE STUDY

The management of the study unit was not willing to disclose all the informationavailable with them. Hence it was not possible to make deep study

The study was confined to a single unit. Hence the findings of the study cannot begeneralized.

Time factor is one of the limitations of the study. It was difficult to collect all theinformation in a short span of time. So the scope of the study was limited.

Accurate data was not available for calculations. The study was conducted with the help of 5yrs data in which current year was not

included due to unavailability of data.

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CHAPTER 3

DATA ANALYSIS&INTERPRETATION

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TABLE NO: 3.1.1 SHWOING THE CASH FLOW STATEMENT FOR THE YEAR

ENDED 31st

MARCH 2007

(Rs in Lakh)

Cash Flow From Operating Activities

Net Profit as per P&L Account 2243.24

Adjustment for

Add: Depreciation 764.36

Prior year items 22.42

786.78

Less: Interest income 964.76

Profit on sale of fixed assets 2.51

Provision for dividend tax 52.57

Target plus 442.14

Provision for Dividend 309.33

Provision for bad and doubtful debts 158.5


Provision for tax 956

2890.23 (2103.45)

Operating profit after working capital changes 139.79

Add: increase in current liabilities 116.99

Increase in provision 779.17

Decrease in Sundry Debtors 1159.16

Decrease in Loans and Advances 795.5

Decrease in Inventories 379.28

3230.1

Less: Increase in Sundry Debtors 799.15

Increase in inventories 4158.38

Increase in advance Tax 788.29

5745.82

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Cash flow from investing activities (2375.93)

Add: Interest income 1486.69

Sale of fixed assets 10.2

Miscellaneous 17.53

1514.42

Less: Investment in share 17.5

Purchase of fixed asset 2386.63

Change in CAP WIP 3874.1

6278.23

Cash flow from financing activities (4763.81)

Net increase in cash and cash equivalent (7139.74)

Cash and cash Equivalent at the beginning of the year 16090.35

Cash and Cash Equivalent at the end of the year 8950.61

(Source: kmml Annual Report)

INTERPRETATION

The above analysis identifies a net increase in cash and cash equivalents of Rs. (7139.74 lakh) in

the year 2006-2007. Cash equivalents at the beginning of the year was Rs.16090.35 lakh and

cash Equivalents at the end of the year was Rs. 8950.6 lakh. Here the cash flow from financing

activities is more than from the companys investing and operating activities. The reason is that

the companys changes in the size and composition of the owners capital and additional

resources provided by the owners and the redemptions of shares.

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TABLE NO: 3.1.2 SHOWING THE CASH FLOW STATEMENT FOR THE YEAR

ENDED 31ST

MARCH 2008

(Rs in lakh)



Adjustment for


836.69


Profit on sale of fixed assets 6.77


Provision for Dividend 309.33


Provision for tax 360

1276.77 (440.08)





4933.67


Increase in inventories 158.25


1906.6 3027.07

Cash flow from investing activities 3630.62



567.56

Less: Purchase of fixed asset 1963.66

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Less: Change in CAP WIP 1996.13

3959.79 (3392.23)

Cash flow from financing activities 238.39

Less: Dividend Paid 309.33

Less: Dividend Tax Paid 52057

361.9


Cash and cash Equivalent at the beginning of the year 8950.61



INTERPRETATION

The above analysis identifies a net increase in cash and cash equivalents of Rs. (123.51) in the

year 2007-2008. Cash equivalents at the beginning of the year was Rs. 8950.61 and cash

equivalents at the end of the year was Rs. 8827.1 lakh. Cash flow from investing activities is

more in this year because of the cash advances and loans made to third parties and from the sale

of fixed assets. Therefore the company got the good cash position and the amounts to meet the

obligations.

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ENDED 31ST

MARCH 2009

(Rs in lakh)



Adjustment for


Foreign Exchange Fluctuation 8.06


904.19


Profit on sale of fixed assets 5059

Provision for bad and doubtful debts 1638.34

Provision for Dividend 309033



3112.23 (2208.04)





Decrease in inventories 3791.29

6766.81



2889.01




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820.3

Less: Purchase of fixed asset and Change in CAP WIP 1545.26

(724.96)

Cash flow from financing activities


Less: Dividend Tax Paid 52.57

361.9

Net increase in cash and cash equivalent 5257.16

Cash and cash Equivalent at the beginning of the year

(Effects on foreign exchange fluctuations)

8827.1

(8.06)


(Source: Kmml Annual Report)

INTERPRETATION


the year 2008-2009. Cash equivalents at the beginning of the year was Rs.8827.1 lakh and cash

equivalents at the end of the year was Rs. 14076.2 lakh. The cash was generated from the

investing and financing activities also. And the operating activities are also enough to meet the

efficiency of the production.

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ENDED 31ST

MARCH 2010

(Rs in lakh)



Adjustment for


Prior year adjustments 8.13

Loss on sale of fixed assets 0.05 1254.12Less: interest income 1287.13

Provision for dimution in the value of land 680.70


Prior period adjustments 6.52

Effects of exchange rate changes 9.95

Provision for expenses on abandoned project 179.26

Provision for dividend 1546.64

3967.08 3967.08

Operating profit before working capital changes 6532.06

Add: increase in provision 1933.54

Decrease in inventories/ stock on import license 955.81 2889.35

Less: increase in Sundry debtors 1506.36

Decrease in current liabilities 369.67

Increase in Loans& Advances 236.79

Increase in advance tax 1701.89

3814.71 3814.71




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1002.84

Less: Change in CAP WIP 6525.47



Less: Dividend Tax Paid 52.57 361.90



(Effects on exchange rate fluctuations)

14076.20

9.95



INTERPRETATION

The above analysis identifies a net increase in cash and cash equivalents of Rs. (227.83) in the

year 2009-2010. Cash equivalents at the beginning of the year was Rs.14076.20 lakh and cash

equivalents at the end of the year was Rs. 13,808.32 lakh. In this year the company acquired the

maximum cash flows from the investing and operating activities. Because of the scaled

operations and the acquired strategic assets.

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ENDED 31ST

MARCH 2011

(Rs in lakh)



Adjustment for


Prior year adjustments 0.00

Loss on sale of fixed assets 0.13 1419.99

Less: interest income 824.54

Provision for dimution in the value of land 0.00


Prior period adjustments 0.00

Effects of exchange rate changes 79.55

Provision for expenses on abandoned project 0.00

Provision for dividend 1546.64

2750.41 2750.41

Operating profit before working capital changes 4940.91

Add: increase in provision 1773.18

Decrease in inventories/ stock on import license 0.00 15002.55

Less: increase in Sundry debtors 1711.93

Decrease in current liabilities 0.00

Increase in Loans& Advances 1354.73

Increase in advance tax 2847.05

6237.22 6237.22




1221.35

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Less: Change in CAP WIP 8367.01 14867.01



Less: Dividend Tax Paid 256.88 1803.52



(Effects on exchange rate fluctuations)

13808.32

79.55



INTERPRETATION


the year 2010-2011. Cash equivalents at the beginning of the year was Rs. 13808.32 lakh and

cash equivalents at the end of the year was Rs. 12144.93 lakh. In 2010-11 the effects on the

exchange rate fluctuations and the new project and cash flows from the sale of fixed

assets,interest income and investing activities leads to the maximization of the cash to meet the

obligations and the expansion of the production.

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CASH FLOW STATEMENT ANALYSIS

Cash Flow Yield Ratio = Net cash Flows from Operating Activities/ Net income

Year Net cash Flows from

operating activities

Net income Cash flow Yield Ratio

2006-07 2243.24 34311.02 0.06

2007-08 1043.63 31127.58 0.03

2008-09 4674.26 40679.26 0.11

2009-10 9245.02 48748.45 0.18

2010-11 6271.33 55982.42 0.11

INTERPRETATION

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Net Cash Flow to Sales Ratio

Cash Flow to Sales Ratio = Net Cash Flow from Operating Activities/ Net Sales

Year Net Cash Flow from

Operating Activities

Net Sales Cash Flow to Sales

Ratio

2006-07 2243.24 29574.49 0.07

2007-08 1043.63 30748.69 0.03

2008-09 4674.26 41908.91 0.11

2009-10 9245.02 48398.20 0.19

2010-11 6271.33 53938.54 0.11

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

2006-07 2007-08 2008-09 2009-10 2010-11

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INTERPRETATION

0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

0.2

2006-07 2007-08 2008-09 2009-10 2010-11

Series 1

Series 1

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Net Cash Flow to

Average Total Assets Ratio = Net Cash Flow from Operating Activities/ Average Total Assets

Year Net Cash Flow from

Operating Activities

Average Total Assets Net Cash Flow to

Average Total Assets

Ratio

2006-07 2243.24 41500.05 0.05

2007-08 1043.63 42959.03 0.02

2008-09 4674.26 57640.28 0.08

2009-10 9245.02 63518.36 0.14

2010-11 6271.33 74262.55 0.08

INTERPRETATION

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0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

2006-07 2007-08 2008-09 2009-10 2010-11

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Schedule of changes in working capital

particulars Previous Year

2005-06

(Rs)

Current Year

2006-07

(Rs)

Working

capital

Increase(Dr)

Working

capital

Decrease(Cr)

Current Assets:

Interest accrued on loan

and deposits

Raw materials

Stores, spares and fuel

Loose tools

Finished goods

Work-in progress

Sundry debtors

Cash in hand

Stamps on hand

Balance with bank

Govt treasuryTotal Current Assets(A)

Current Liability:

Trade and other creditors

Advance payment from

customers

Other liability

Total Current Liability(B)

Working Capital(A-B)

Net Decrease in working

capital

Total

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INTERPRETATION

ANALYSIS

TABLE NO: 3.2.1 SHOWING THE CURRENT RATIO

(Rs in lakh)

Year Current Asset Current liabilities Current Ratio

2006-07 22531.31 58493.47 3.82

2007-08 23688.82 10081.66 2.34

2008-09 26044.46 120371.61 2.16

2009-10 25961.61 11667.93 2.22

2010-11 36862.77 27265.53 1.36

Interpretation

The current ratio of the firm measures the short term solvency of the i.e. its ability to meet short

term obligation. In a sound business, a ratio of 2: 1 considered to be an ideal norm. The above

Table shows the relationship between current assets and current liabilitys. This table shows that

the company having the sufficient current assets for the past 5 years and in the year 2008-2009 is

the firms current ratio is 2.16. It shows there are sufficient current asset to pay off its current

liability.

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TABLE NO: 3.2.2 SHOWING THE QUICK RATIO

(Rs in lakh)

Year Quick asset Current liabilities Quick ratio

2006-07 10557.07 58493.47 1.79

2007-08 11556.33 10081.66 1.14

2008-09 17703.26 120371.61 1.47

2009-10 19226.15 11667.93 1.64

2010-11 18566.78 27265.53 0.74

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

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Interpretation:

The above table shows the relationship between Quick assets and current liabilitys. So under

this table the year 2006-2010 the firms quick ratio is more than the basic ratio of 1: 1. It

represents the company is having sufficient quick assets for the past few years.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

1.8

2

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

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TABLE NO: 3.2.3 SHOWING THE ABSOLUTE LIQUID RATIO

(Rs in lakh)

Year Absolute

Liquid Asset

Current

Liability

Absolute

Liquidity Ratio

2006-07 8949.26 58493.47 1.51

2007-08 8814.22 10081.66 0.87

2008-09 14066.64 120371.61 1.16

2009-10 13808.32 11667.93 1.18

2010-11 12144.93 27265.53 0.48


Interpretation

The standard absolute liquidity ratio is 0.75: 1. This table shows that the absolute liquidity ratio

in the five year is good for the company. At present the absolute liquidity ratio is in good

position, indicating that cash form a major part of the current asset.

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TABLE NO: 3.2.8 SHOWING GROSS PROFIT RATIO

(Rs in lakh)

Year Gross Profit Net Sales Gross Profit Ratio

2006-07 5714.61 29574.49 19.32

2007-08 8451.49 30748.69 27.48

2008-09 17466.78 41908.91 41.67

2009-10 22908.8 48398.20 47.33

2010-11 6271.33 53938.54 11.62


0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

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Interpretation

A high ratio is favorable to the companys financial position. The above table shows that the

relationship between the firms gross profit of the business and the net sales of the business. The

highest gross profit ratio is 47.33: 1 in 2010 and the lowest ratio is 19.32 in 2007.

0

5

10

15

20

25

30

35

40

45

50

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

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TABLE NO: 3.2.9. SHOWING NET PROFIT RATIO

(Rs in lakh)

Year Net Profit Net Sales Net Profit Ratio

2006-07 1237.15 29574.49 4.18

2007-08 612.74 30748.69 1.99

2008-09 449.76 41908.91 1.07

2009-10 6063.23 48398.20 12.53

2010-11 2811.92 53938.54 5.21


Interpretation

The net profit ratio is decreasing up to the year 2008-2009. This is due to the increase in

cost of production. It will affect company survival and profitability. And in the year 2009-2010

net profit shows an increasing trend.

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TABLE NO: 3.2.10 SHOWING OPERATING RATIO

(Rs in lakh)

Year Operating Cost Net Sales Operating Ratio

2006-07 1237.15 29574.49

2007-08 30748.69

2008-09 41908.91

2009-10 48398.20

2010-11 53938.54


0

2

4

6

8

10

12

14

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

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Interpretation

The operating expenses of the company are increasing in the year 2005-2006 and 2006-2007.

This is because of the operating expenses of the company increase and in the remaining years. It

is decreased at increasing rate.

0

20

40

60

80

100

120

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

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TABLE NO: 3.2.11 SHOWING INVENTORY TURNOVER RATIO

(Rs in lakh)

Year Cost of Goods Sold Average Stock Inventory turnover

Ratio

2006-07 23859.88 11974.24 1.99

2007-08 22297.20 12132.43 1.84

2008-09 24442.13 7855.51 3.11

2009-10 25486.13 7538.33 3.38

2010-11 53170.5 617.535 86.10


Interpretation

The table shows there is an increasing trend in the year 2005-2006, after this year the coming

two years is a slight decrease because of over investment in inventory in the year 2008-2009 the

turnover ratio is increased.

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TABLE NO: 3.2.12 SHOWING FIXED ASSET TURNOVER RATIO

(Rs in lakh)

year Net Sales Fixed Assets Fixed assets turnover

Ratio

2006-07 29574.49 11746.84 2.51

2007-08 30748.69 12862.52 2.39

2008-09 41908.91 17803.97 2.33

2009-10 48398.20 17803.97 2.71

2010-11 53938.54 21883.40 1.44


0

10

20

30

40

50

60

70

80

90

100

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

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Interpretation

In the year 2005-2010 the fixed assets turnover ratio is a satisfactory level because the fixed

assets are utilized efficiently and other years the turnovers ratio is decreased.

2.1

2.2

2.3

2.4

2.5

2.6

2.7

2.8

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

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TABLE NO: 3.2.13 SHOWING DEBTORS TURNOVER RATIO

(Rs in lakh)

Year Net Credit Sales Average Debtor Debtors

turnover ratio

2006-07 29574.49 1453.40 20.35

2007-08 30748.69 2606.48 11.79

2008-09 41908.91 3203.56 13.08

2009-10 48398.20 4709.92 10.27

2010-11 53938.54 6421.85 8.39


Interpretation

In the year 2006-2007 the debtors turnover ratio is increase due to decrease the collection periods

that implies prompt payment by debtors. In the remaining years debtors turnover ratio is decrease

because take long period to make payments.

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TABLE NO: 3.2.14 SHOWING WORKING CAPITAL TURNOVER RATIO

(Rs in lakh)


0

5

10

15

20

25

2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

Year Net Sales Working Capital Working capital

turnover ratio

2006-07 29574.49 23050.00 1.28

2007-08 30748.69 20231.02 1.52

2008-09 41908.91 20215.17 2.07

2009-10 48398.20 18969.04 2.55

2010-11 53938.54 9597.24 5.62

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Interpretation

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